Correlation Between JPMorgan Chase and ARMOUR Residential

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

Diversification Opportunities for JPMorgan Chase and ARMOUR Residential

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between JPMorgan and ARMOUR is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and ARMOUR Residential REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARMOUR Residential REIT and JPMorgan Chase 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 JPMorgan Chase Co are associated (or correlated) with ARMOUR Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARMOUR Residential REIT has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and ARMOUR Residential go up and down completely randomly.

Pair Corralation between JPMorgan Chase and ARMOUR Residential

Considering the 90-day investment horizon JPMorgan Chase is expected to generate 2.54 times less return on investment than ARMOUR Residential. But when comparing it to its historical volatility, JPMorgan Chase Co is 1.71 times less risky than ARMOUR Residential. It trades about 0.2 of its potential returns per unit of risk. ARMOUR Residential REIT is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  508.00  in ARMOUR Residential REIT on September 4, 2022 and sell it today you would earn a total of  84.00  from holding ARMOUR Residential REIT or generate 16.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

JPMorgan Chase Co  vs.  ARMOUR Residential REIT

 Performance (%) 
       Timeline  
JPMorgan Chase 
JPMorgan Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, JPMorgan Chase revealed solid returns over the last few months and may actually be approaching a breakup point.

JPMorgan Price Channel

ARMOUR Residential REIT 
ARMOUR Performance
0 of 100
Over the last 90 days ARMOUR Residential REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

ARMOUR Price Channel

JPMorgan Chase and ARMOUR Residential Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JPMorgan Chase and ARMOUR Residential

The main advantage of trading using opposite JPMorgan Chase and ARMOUR Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, ARMOUR Residential 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 ARMOUR Residential will offset losses from the drop in ARMOUR Residential's long position.
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The idea behind JPMorgan Chase Co and ARMOUR Residential REIT 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.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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