Correlation Between JP Morgan and Microsoft Corp

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

Diversification Opportunities for JP Morgan and Microsoft Corp

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between JP Morgan and Microsoft is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding JP Morgan Chase and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp 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 Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of JP Morgan i.e., JP Morgan and Microsoft Corp go up and down completely randomly.

Pair Corralation between JP Morgan and Microsoft Corp

Considering the 90-day investment horizon JP Morgan Chase is expected to under-perform the Microsoft Corp. But the stock apears to be less risky and, when comparing its historical volatility, JP Morgan Chase is 1.21 times less risky than Microsoft Corp. The stock trades about -0.12 of its potential returns per unit of risk. The Microsoft Corp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  30,067  in Microsoft Corp on April 7, 2022 and sell it today you would lose (3,782)  from holding Microsoft Corp or give up 12.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

JP Morgan Chase  vs.  Microsoft Corp

 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 weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in August 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0351
Payout Ratio
0.3
Last Split Factor
3:2
Forward Annual Dividend Rate
4.0
Dividend Date
2022-07-31
Ex Dividend Date
2022-07-05
Last Split Date
2000-06-12

JP Morgan Price Channel

Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0096
Payout Ratio
0.26
Last Split Factor
2:1
Forward Annual Dividend Rate
2.48
Dividend Date
2022-09-08
Ex Dividend Date
2022-08-17
Last Split Date
2003-02-18

Microsoft Price Channel

JP Morgan and Microsoft Corp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with JP Morgan and Microsoft Corp

The main advantage of trading using opposite JP Morgan and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JP Morgan position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.
The idea behind JP Morgan Chase and Microsoft Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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