Correlation Between JP Morgan and Amazon

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

Diversification Opportunities for JP Morgan and Amazon

0.09
  Correlation Coefficient

Significant diversification

The 3 months correlation between JP Morgan and Amazon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and JP Morgan 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 JP Morgan Chase are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of JP Morgan i.e., JP Morgan and Amazon go up and down completely randomly.

Pair Corralation between JP Morgan and Amazon

Considering the 90-day investment horizon JP Morgan is expected to generate 2.7 times less return on investment than Amazon. But when comparing it to its historical volatility, JP Morgan Chase is 2.41 times less risky than Amazon. It trades about 0.32 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  11,376  in Amazon Inc on May 17, 2022 and sell it today you would earn a total of  2,979  from holding Amazon Inc or generate 26.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  Amazon Inc

 Performance (%) 
       Timeline  
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

Amazon Inc 
Amazon Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Amazon disclosed solid returns over the last few months and may actually be approaching a breakup point.

Amazon Price Channel

JP Morgan and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and Amazon

The main advantage of trading using opposite JP Morgan and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.
The idea behind JP Morgan Chase and Amazon Inc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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