Correlation Between General Electric and JP Morgan

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

Diversification Opportunities for General Electric and JP Morgan

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between General and JP Morgan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding General Electric 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 General Electric 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 General Electric 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 General Electric i.e., General Electric and JP Morgan go up and down completely randomly.

Pair Corralation between General Electric and JP Morgan

Allowing for the 90-day total investment horizon General Electric is expected to generate 1.32 times more return on investment than JP Morgan. However, General Electric is 1.32 times more volatile than JP Morgan Chase. It trades about 0.05 of its potential returns per unit of risk. JP Morgan Chase is currently generating about 0.04 per unit of risk. If you would invest  5,009  in General Electric on May 13, 2022 and sell it today you would earn a total of  2,881  from holding General Electric or generate 57.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Electric  vs.  JP Morgan Chase

 Performance (%) 
       Timeline  
General Electric 
General Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish technical and fundamental indicators, General Electric may actually be approaching a critical reversion point that can send shares even higher in September 2022.

General Price Channel

JP Morgan Chase 
JP Morgan Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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

General Electric and JP Morgan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and JP Morgan

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

General Electric

Pair trading matchups for General Electric

The idea behind General Electric 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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