Correlation Between JP Morgan and Coca Cola

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

Diversification Opportunities for JP Morgan and Coca Cola

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between JP Morgan and Coca Cola is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase and Coca-Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca-Cola has no effect on the direction of JP Morgan i.e., JP Morgan and Coca Cola go up and down completely randomly.

Pair Corralation between JP Morgan and Coca Cola

Considering the 90-day investment horizon JP Morgan Chase is expected to generate 1.32 times more return on investment than Coca Cola. However, JP Morgan is 1.32 times more volatile than Coca-Cola. It trades about 0.04 of its potential returns per unit of risk. Coca-Cola is currently generating about -0.02 per unit of risk. If you would invest  11,722  in JP Morgan Chase on May 15, 2022 and sell it today you would earn a total of  491.00  from holding JP Morgan Chase or generate 4.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  Coca-Cola

 Performance (%) 
       Timeline  
JP Morgan Chase 
JP Morgan Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, JP Morgan is not utilizing all of its potentials. The new stock price chaos, may contribute to medium-term losses for the stakeholders.

JP Morgan Price Channel

Coca-Cola 
Coca Cola Performance
0 of 100
Over the last 90 days Coca-Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Coca Cola is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Coca Cola Price Channel

JP Morgan and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with JP Morgan and Coca Cola

The main advantage of trading using opposite JP Morgan and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.
The idea behind JP Morgan Chase and Coca-Cola 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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