Correlation Between JP Morgan and Caterpillar

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

Diversification Opportunities for JP Morgan and Caterpillar

0.84
  Correlation Coefficient

Very poor diversification

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

Pair Corralation between JP Morgan and Caterpillar

Considering the 90-day investment horizon JP Morgan Chase is expected to generate 0.89 times more return on investment than Caterpillar. However, JP Morgan Chase is 1.12 times less risky than Caterpillar. It trades about -0.09 of its potential returns per unit of risk. Caterpillar is currently generating about -0.13 per unit of risk. If you would invest  11,243  in JP Morgan Chase on July 3, 2022 and sell it today you would lose (793.00)  from holding JP Morgan Chase or give up 7.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  Caterpillar

 Performance (%) 
       Timeline  
JP Morgan Chase 
JP Morgan Performance
0 of 100
Over the last 90 days JP Morgan Chase has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

JP Morgan Price Channel

Caterpillar 
Caterpillar Performance
0 of 100
Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Caterpillar is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Caterpillar Price Channel

JP Morgan and Caterpillar Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and Caterpillar

The main advantage of trading using opposite JP Morgan and Caterpillar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, Caterpillar 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 Caterpillar will offset losses from the drop in Caterpillar's long position.
JP Morgan vs. Amazon Inc
The idea behind JP Morgan Chase and Caterpillar 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.
Caterpillar vs. Amazon Inc
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 CEO Directory module to screen CEOs from public companies around the world.

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