Correlation Between Jacobs Solutions and Air Lease

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

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

Diversification Opportunities for Jacobs Solutions and Air Lease

0.05

Correlation Coefficient

Jacobs Solutions  Air Lease

Significant diversification

The 3 months correlation between Jacobs and Air is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Air Lease go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Air Lease

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.68 times more return on investment than Air Lease. However, Jacobs Solutions is 1.47 times less risky than Air Lease. It trades about 0.08 of its potential returns per unit of risk. Air Lease is currently generating about 0.02 per unit of risk. If you would invest  11,811  in Jacobs Solutions on September 22, 2024 and sell it today you would earn a total of  1,764  from holding Jacobs Solutions or generate 14.94% return on investment over 90 days.

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

Jacobs Solutions  vs.  Air Lease

Jacobs Solutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 8 (%) 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.

Air Lease

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Jacobs Solutions and Air Lease

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

The idea behind Jacobs Solutions and Air Lease 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.