Correlation Between Jacobs Solutions and Ambev SA

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

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

Diversification Opportunities for Jacobs Solutions and Ambev SA

-0.85

Correlation Coefficient

Jacobs Solutions  Ambev SA

Pay attention - limited upside

The 3 months correlation between Jacobs and Ambev is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR and Jacobs Solutions 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 Jacobs Solutions are associated (or correlated) with Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Ambev SA go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Ambev SA

Taking into account the 90-day investment horizon Jacobs Solutions is expected to under-perform the Ambev SA. But the stock apears to be less risky and, when comparing its historical volatility, Jacobs Solutions is 1.59 times less risky than Ambev SA. The stock trades about -0.11 of its potential returns per unit of risk. The Ambev SA ADR is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Ambev SA ADR on December 27, 2024 and sell it today you would earn a total of  46.00  from holding Ambev SA ADR or generate 24.86% return on investment over 90 days.

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

Jacobs Solutions  vs.  Ambev SA ADR

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.

Ambev SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ambev SA ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Ambev SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jacobs Solutions and Ambev SA

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

The idea behind Jacobs Solutions and Ambev SA ADR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.