Correlation Between Barnes and Jacobs Solutions

Can any of the company-specific risk be diversified away by investing in both Barnes and Jacobs Solutions 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 Barnes and Jacobs Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barnes Group and Jacobs Solutions, you can compare the effects of market volatilities on Barnes and Jacobs Solutions 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 Barnes with a short position of Jacobs Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and Jacobs Solutions.

Diversification Opportunities for Barnes and Jacobs Solutions

0.8

Correlation Coefficient

Barnes  Jacobs Solutions

Very poor diversification

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

Pair Corralation between Barnes and Jacobs Solutions

Taking into account the 90-day investment horizon Barnes Group is expected to generate 0.08 times more return on investment than Jacobs Solutions. However, Barnes Group is 12.85 times less risky than Jacobs Solutions. It trades about 0.25 of its potential returns per unit of risk. Jacobs Solutions is currently generating about -0.08 per unit of risk. If you would invest  4,654  in Barnes Group on September 20, 2024 and sell it today you would earn a total of  63.00  from holding Barnes Group or generate 1.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Barnes Group  vs.  Jacobs Solutions

Barnes Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Barnes sustained solid returns over the last few months and may actually be approaching a breakup point.

Jacobs Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, Jacobs Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Barnes and Jacobs Solutions

The main advantage of trading using opposite Barnes and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, Jacobs Solutions 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 Jacobs Solutions will offset losses from the drop in Jacobs Solutions' long position.

The idea behind Barnes Group and Jacobs Solutions 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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.