Correlation Between JP Morgan and Costco Wholesale

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

Diversification Opportunities for JP Morgan and Costco Wholesale

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between JP Morgan and Costco is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of JP Morgan i.e., JP Morgan and Costco Wholesale go up and down completely randomly.

Pair Corralation between JP Morgan and Costco Wholesale

Considering the 90-day investment horizon JP Morgan is expected to generate 1.45 times less return on investment than Costco Wholesale. In addition to that, JP Morgan is 1.1 times more volatile than Costco Wholesale. It trades about 0.04 of its total potential returns per unit of risk. Costco Wholesale is currently generating about 0.06 per unit of volatility. If you would invest  47,457  in Costco Wholesale on September 1, 2022 and sell it today you would earn a total of  5,439  from holding Costco Wholesale or generate 11.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  Costco Wholesale

 Performance (%) 
       Timeline  
JP Morgan Chase 
JP Morgan Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, JP Morgan revealed solid returns over the last few months and may actually be approaching a breakup point.

JP Morgan Price Channel

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

Costco Price Channel

JP Morgan and Costco Wholesale Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and Costco Wholesale

The main advantage of trading using opposite JP Morgan and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.
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The idea behind JP Morgan Chase and Costco Wholesale 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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