Correlation Between JP Morgan and General Electric

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

Diversification Opportunities for JP Morgan and General Electric

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between JP Morgan and General is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric 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 General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of JP Morgan i.e., JP Morgan and General Electric go up and down completely randomly.

Pair Corralation between JP Morgan and General Electric

Considering the 90-day investment horizon JP Morgan is expected to generate 1.79 times less return on investment than General Electric. But when comparing it to its historical volatility, JP Morgan Chase is 1.32 times less risky than General Electric. It trades about 0.03 of its potential returns per unit of risk. General Electric is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,136  in General Electric on May 9, 2022 and sell it today you would earn a total of  2,300  from holding General Electric or generate 44.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  General Electric

 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 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

General Electric 
General Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, General Electric is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

General Price Channel

JP Morgan and General Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and General Electric

The main advantage of trading using opposite JP Morgan and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.
The idea behind JP Morgan Chase and General Electric 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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