Correlation Between Jacobs Solutions and DDC Enterprise

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

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

Diversification Opportunities for Jacobs Solutions and DDC Enterprise

0.22

Correlation Coefficient

Jacobs Solutions  DDC Enterprise

Modest diversification

The 3 months correlation between Jacobs and DDC is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and DDC Enterprise Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DDC Enterprise 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 DDC Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DDC Enterprise has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and DDC Enterprise go up and down completely randomly.

Pair Corralation between Jacobs Solutions and DDC Enterprise

Taking into account the 90-day investment horizon Jacobs Solutions is expected to under-perform the DDC Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, Jacobs Solutions is 7.65 times less risky than DDC Enterprise. The stock trades about -0.16 of its potential returns per unit of risk. The DDC Enterprise Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  16.00  in DDC Enterprise Limited on October 6, 2024 and sell it today you would earn a total of  4.00  from holding DDC Enterprise Limited or generate 25.0% return on investment over 90 days.

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

Jacobs Solutions  vs.  DDC Enterprise Limited

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.

DDC Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DDC Enterprise Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Jacobs Solutions and DDC Enterprise

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

The idea behind Jacobs Solutions and DDC Enterprise Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.