Correlation Between JPMorgan Chase and Merck
Can any of the company-specific risk be diversified away by investing in both JPMorgan Chase and Merck 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 JPMorgan Chase and Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JPMorgan Chase Co and Merck Company, you can compare the effects of market volatilities on JPMorgan Chase and Merck 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 JPMorgan Chase with a short position of Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of JPMorgan Chase and Merck.
Diversification Opportunities for JPMorgan Chase and Merck
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between JPMorgan and Merck is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding JPMorgan Chase Co and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company and JPMorgan Chase 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 JPMorgan Chase Co are associated (or correlated) with Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of JPMorgan Chase i.e., JPMorgan Chase and Merck go up and down completely randomly.
Pair Corralation between JPMorgan Chase and Merck
Considering the 90-day investment horizon JPMorgan Chase Co is expected to under-perform the Merck. In addition to that, JPMorgan Chase is 1.27 times more volatile than Merck Company. It trades about -0.18 of its total potential returns per unit of risk. Merck Company is currently generating about 0.1 per unit of volatility. If you would invest 12,220 in Merck Company on January 19, 2024 and sell it today you would earn a total of 317.00 from holding Merck Company or generate 2.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JPMorgan Chase Co vs. Merck Company
Performance |
| Timeline |
| JPMorgan Chase |
| Merck Company |
JPMorgan Chase and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JPMorgan Chase and Merck
The main advantage of trading using opposite JPMorgan Chase and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JPMorgan Chase position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| JPMorgan Chase vs. Citigroup | JPMorgan Chase vs. Wells Fargo | JPMorgan Chase vs. Toronto Dominion Bank | JPMorgan Chase vs. Nu Holdings |
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 the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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