Correlation Between Dycom Industries and Jacobs Solutions

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

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

Diversification Opportunities for Dycom Industries and Jacobs Solutions

0.84

Correlation Coefficient

Dycom Industries  Jacobs Solutions

Very poor diversification

The 3 months correlation between Dycom and Jacobs is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dycom Industries and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Dycom Industries 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 Dycom Industries 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 Dycom Industries i.e., Dycom Industries and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Dycom Industries and Jacobs Solutions

Allowing for the 90-day total investment horizon Dycom Industries is expected to under-perform the Jacobs Solutions. In addition to that, Dycom Industries is 2.39 times more volatile than Jacobs Solutions. It trades about -0.06 of its total potential returns per unit of risk. Jacobs Solutions is currently generating about -0.12 per unit of volatility. If you would invest  13,591  in Jacobs Solutions on December 26, 2024 and sell it today you would lose (1,194) from holding Jacobs Solutions or give up 8.79% of portfolio value over 90 days.

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

Dycom Industries  vs.  Jacobs Solutions

Dycom Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dycom Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jacobs Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jacobs Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's forward-looking indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Pair Trading with Dycom Industries and Jacobs Solutions

The main advantage of trading using opposite Dycom Industries and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dycom Industries 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 Dycom Industries 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.