Correlation Between Merchants Bancorp and JP Morgan

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Can any of the company-specific risk be diversified away by investing in both Merchants Bancorp and JP Morgan 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 Merchants Bancorp and JP Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merchants Bancorp and JP Morgan Chase, you can compare the effects of market volatilities on Merchants Bancorp and JP Morgan 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 Merchants Bancorp with a short position of JP Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merchants Bancorp and JP Morgan.

Diversification Opportunities for Merchants Bancorp and JP Morgan

  Correlation Coefficient

Weak diversification

The 3 months correlation between Merchants and JP Morgan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Merchants Bancorp and JP Morgan Chase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Chase and Merchants Bancorp 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 Merchants Bancorp are associated (or correlated) with JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Chase has no effect on the direction of Merchants Bancorp i.e., Merchants Bancorp and JP Morgan go up and down completely randomly.

Pair Corralation between Merchants Bancorp and JP Morgan

Given the investment horizon of 90 days Merchants Bancorp is expected to generate 1.12 times more return on investment than JP Morgan. However, Merchants Bancorp is 1.12 times more volatile than JP Morgan Chase. It trades about 0.67 of its potential returns per unit of risk. JP Morgan Chase is currently generating about 0.32 per unit of risk. If you would invest  2,297  in Merchants Bancorp on May 17, 2022 and sell it today you would earn a total of  545.00  from holding Merchants Bancorp or generate 23.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
ValuesDaily Returns

Merchants Bancorp  vs.  JP Morgan Chase

 Performance (%) 
Merchants Bancorp 
Merchants Performance
13 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Merchants Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Merchants Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Merchants Price Channel

JP Morgan Chase 
JP Morgan Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in JP Morgan Chase are ranked lower than 1 (%) 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 latest stock price chaos, may contribute to medium-term losses for the stakeholders.

JP Morgan Price Channel

Merchants Bancorp and JP Morgan Volatility Contrast

   Predicted Return Density   

Pair Trading with Merchants Bancorp and JP Morgan

The main advantage of trading using opposite Merchants Bancorp and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merchants Bancorp position performs unexpectedly, JP Morgan 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 JP Morgan will offset losses from the drop in JP Morgan's long position.
The idea behind Merchants Bancorp and JP Morgan Chase 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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