Correlation Between OceanFirst Financial and JP Morgan

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

Diversification Opportunities for OceanFirst Financial and JP Morgan

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between OceanFirst and JP Morgan is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding OceanFirst Financial Corp 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 OceanFirst Financial 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 OceanFirst Financial Corp 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 OceanFirst Financial i.e., OceanFirst Financial and JP Morgan go up and down completely randomly.

Pair Corralation between OceanFirst Financial and JP Morgan

Given the investment horizon of 90 days OceanFirst Financial Corp is expected to generate 0.81 times more return on investment than JP Morgan. However, OceanFirst Financial Corp is 1.23 times less risky than JP Morgan. It trades about 0.25 of its potential returns per unit of risk. JP Morgan Chase is currently generating about 0.12 per unit of risk. If you would invest  1,980  in OceanFirst Financial Corp on May 21, 2022 and sell it today you would earn a total of  133.00  from holding OceanFirst Financial Corp or generate 6.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

OceanFirst Financial Corp  vs.  JP Morgan Chase

 Performance (%) 
       Timeline  
OceanFirst Financial Corp 
OceanFirst Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in OceanFirst Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, OceanFirst Financial may actually be approaching a critical reversion point that can send shares even higher in September 2022.

OceanFirst Price Channel

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 recent stock price chaos, may contribute to medium-term losses for the stakeholders.

JP Morgan Price Channel

OceanFirst Financial and JP Morgan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with OceanFirst Financial and JP Morgan

The main advantage of trading using opposite OceanFirst Financial and JP Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OceanFirst Financial 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.

OceanFirst Financial Corp

Pair trading matchups for OceanFirst Financial

The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against OceanFirst Financial as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. OceanFirst Financial's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, OceanFirst Financial's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to OceanFirst Financial Corp.
The idea behind OceanFirst Financial Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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