Correlation Between Grocery Outlet and Jacobs Solutions

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

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

Diversification Opportunities for Grocery Outlet and Jacobs Solutions

0.17

Correlation Coefficient

Grocery Outlet  Jacobs Solutions

Average diversification

The 3 months correlation between Grocery and Jacobs is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Grocery Outlet and Jacobs Solutions

Allowing for the 90-day total investment horizon Grocery Outlet is expected to generate 2.17 times less return on investment than Jacobs Solutions. In addition to that, Grocery Outlet is 2.83 times more volatile than Jacobs Solutions. It trades about 0.05 of its total potential returns per unit of risk. Jacobs Solutions is currently generating about 0.28 per unit of volatility. If you would invest  13,528  in Jacobs Solutions on October 23, 2024 and sell it today you would earn a total of  595.00  from holding Jacobs Solutions or generate 4.4% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Jacobs Solutions

Grocery Outlet Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Jacobs Solutions

Risk-Adjusted Performance

0 of 100

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 relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Grocery Outlet and Jacobs Solutions

The main advantage of trading using opposite Grocery Outlet and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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 Grocery Outlet Holding 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.