Correlation Between JP Morgan and B of A

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

Diversification Opportunities for JP Morgan and B of A

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between JP Morgan and B of A is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase and Bank Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of America 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 B of A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of America has no effect on the direction of JP Morgan i.e., JP Morgan and B of A go up and down completely randomly.

Pair Corralation between JP Morgan and B of A

Considering the 90-day investment horizon JP Morgan Chase is expected to under-perform the B of A. But the stock apears to be less risky and, when comparing its historical volatility, JP Morgan Chase is 1.13 times less risky than B of A. The stock trades about -0.02 of its potential returns per unit of risk. The Bank Of America is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,532  in Bank Of America on May 20, 2022 and sell it today you would earn a total of  109.00  from holding Bank Of America or generate 3.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  Bank Of America

 Performance (%) 
       Timeline  
JP Morgan Chase 
JP Morgan Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, JP Morgan may actually be approaching a critical reversion point that can send shares even higher in September 2022.

JP Morgan Price Channel

Bank Of America 
B of A Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of America are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, B of A may actually be approaching a critical reversion point that can send shares even higher in September 2022.

B of A Price Channel

JP Morgan and B of A Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and B of A

The main advantage of trading using opposite JP Morgan and B of A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, B of A 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 B of A will offset losses from the drop in B of A's long position.
The idea behind JP Morgan Chase and Bank Of America 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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