Correlation Between JP Morgan and American Express

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Can any of the company-specific risk be diversified away by investing in both JP Morgan and American Express 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 American Express 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 American Express, you can compare the effects of market volatilities on JP Morgan and American Express 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 American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of JP Morgan and American Express.

Diversification Opportunities for JP Morgan and American Express

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between JP Morgan and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of JP Morgan i.e., JP Morgan and American Express go up and down completely randomly.

Pair Corralation between JP Morgan and American Express

Considering the 90-day investment horizon JP Morgan is expected to generate 1.98 times less return on investment than American Express. In addition to that, JP Morgan is 1.11 times more volatile than American Express. It trades about 0.2 of its total potential returns per unit of risk. American Express is currently generating about 0.43 per unit of volatility. If you would invest  13,940  in American Express on May 14, 2022 and sell it today you would earn a total of  2,359  from holding American Express or generate 16.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  American Express

 Performance (%) 
       Timeline  
JP Morgan Chase 
JP Morgan Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 2 (%) 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 current stock price chaos, may contribute to medium-term losses for the stakeholders.

JP Morgan Price Channel

American Express 
American Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, American Express is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.

American Price Channel

JP Morgan and American Express Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and American Express

The main advantage of trading using opposite JP Morgan and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.
The idea behind JP Morgan Chase and American Express 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.

American Express

Pair trading matchups for American Express

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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