Correlation Between Cisco Systems and JP Morgan

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Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and JP Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and JP Morgan Chase, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and JP Morgan.

Diversification Opportunities for Cisco Systems and JP Morgan

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Cisco and JP Morgan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems 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 Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and JP Morgan go up and down completely randomly.

Pair Corralation between Cisco Systems and JP Morgan

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.52 times less return on investment than JP Morgan. But when comparing it to its historical volatility, Cisco Systems is 1.15 times less risky than JP Morgan. It trades about 0.03 of its potential returns per unit of risk. JP Morgan Chase is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,501  in JP Morgan Chase on May 17, 2022 and sell it today you would earn a total of  2,755  from holding JP Morgan Chase or generate 29.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  JP Morgan Chase

 Performance (%) 
       Timeline  
Cisco Systems 
Cisco Performance
0 of 100
Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Cisco 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 latest stock price chaos, may contribute to medium-term losses for the stakeholders.

JP Morgan Price Channel

Cisco Systems and JP Morgan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and JP Morgan

The main advantage of trading using opposite Cisco Systems and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.

Cisco Systems

Pair trading matchups for Cisco Systems

The idea behind Cisco Systems 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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