Correlation Between JP Morgan and Cisco Systems

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

Diversification Opportunities for JP Morgan and Cisco Systems

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between JP Morgan and Cisco is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of JP Morgan i.e., JP Morgan and Cisco Systems go up and down completely randomly.

Pair Corralation between JP Morgan and Cisco Systems

Considering the 90-day investment horizon JP Morgan is expected to generate 2.24 times less return on investment than Cisco Systems. In addition to that, JP Morgan is 1.08 times more volatile than Cisco Systems. It trades about 0.08 of its total potential returns per unit of risk. Cisco Systems is currently generating about 0.2 per unit of volatility. If you would invest  4,375  in Cisco Systems on May 20, 2022 and sell it today you would earn a total of  562.00  from holding Cisco Systems or generate 12.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  Cisco Systems

 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

Cisco Systems 
Cisco Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Cisco Price Channel

JP Morgan and Cisco Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and Cisco Systems

The main advantage of trading using opposite JP Morgan and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' long position.
The idea behind JP Morgan Chase and Cisco Systems 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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