Correlation Between Jacobs Solutions and Chesapeake Energy

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

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

Diversification Opportunities for Jacobs Solutions and Chesapeake Energy

-0.38

Correlation Coefficient

Jacobs Solutions  Chesapeake Energy

Very good diversification

The 3 months correlation between Jacobs and Chesapeake is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy 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 Chesapeake Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Energy has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Chesapeake Energy go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Chesapeake Energy

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.62 times more return on investment than Chesapeake Energy. However, Jacobs Solutions is 1.62 times less risky than Chesapeake Energy. It trades about 0.06 of its potential returns per unit of risk. Chesapeake Energy is currently generating about -0.03 per unit of risk. If you would invest  10,856  in Jacobs Solutions on September 21, 2024 and sell it today you would earn a total of  2,719  from holding Jacobs Solutions or generate 25.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.69%
Values	Daily Returns

Jacobs Solutions  vs.  Chesapeake Energy

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.

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Chesapeake Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jacobs Solutions and Chesapeake Energy

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

The idea behind Jacobs Solutions and Chesapeake Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.