Correlation Between Jacobs Solutions and Barnes

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

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

Diversification Opportunities for Jacobs Solutions and Barnes

0.8

Correlation Coefficient

Jacobs Solutions  Barnes

Very poor diversification

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

Pair Corralation between Jacobs Solutions and Barnes

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 9.51 times more return on investment than Barnes. However, Jacobs Solutions is 9.51 times more volatile than Barnes Group. It trades about 0.05 of its potential returns per unit of risk. Barnes Group is currently generating about 0.39 per unit of risk. If you would invest  13,352  in Jacobs Solutions on September 20, 2024 and sell it today you would earn a total of  114.00  from holding Jacobs Solutions or generate 0.85% return on investment over 90 days.

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

Jacobs Solutions  vs.  Barnes Group

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.

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.

Pair Trading with Jacobs Solutions and Barnes

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

The idea behind Jacobs Solutions and Barnes Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.