Correlation Between China Merchants and JP Morgan

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Can any of the company-specific risk be diversified away by investing in both China Merchants and JP Morgan at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China Merchants and JP Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Merchants Bank and JP Morgan Chase, you can compare the effects of market volatilities on China Merchants and JP Morgan and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China Merchants with a short position of JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Merchants and JP Morgan.

Diversification Opportunities for China Merchants and JP Morgan

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between China and JP Morgan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding China Merchants Bank and JP Morgan Chase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Chase and China Merchants is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Merchants Bank are associated (or correlated) with JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Chase has no effect on the direction of China Merchants i.e., China Merchants and JP Morgan go up and down completely randomly.

Pair Corralation between China Merchants and JP Morgan

Assuming the 90 days horizon China Merchants Bank is expected to under-perform the JP Morgan. In addition to that, China Merchants is 1.19 times more volatile than JP Morgan Chase. It trades about -0.19 of its total potential returns per unit of risk. JP Morgan Chase is currently generating about 0.22 per unit of volatility. If you would invest  11,454  in JP Morgan Chase on May 21, 2022 and sell it today you would earn a total of  710.00  from holding JP Morgan Chase or generate 6.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

China Merchants Bank  vs.  JP Morgan Chase

 Performance (%) 
       Timeline  
China Merchants Bank 
China Performance
0 of 100
Over the last 90 days China Merchants Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward-looking signals remain fairly strong which may send shares a bit higher in September 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

China Price Channel

JP Morgan Chase 
JP Morgan Performance
0 of 100
Over the last 90 days JP Morgan Chase has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, JP Morgan is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

JP Morgan Price Channel

China Merchants and JP Morgan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Merchants and JP Morgan

The main advantage of trading using opposite China Merchants and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Merchants position performs unexpectedly, JP Morgan can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in JP Morgan will offset losses from the drop in JP Morgan's long position.

China Merchants Bank

Pair trading matchups for China Merchants

The idea behind China Merchants Bank and JP Morgan Chase pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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