Correlation Between Jacobs Solutions and Dycom Industries

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

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

Diversification Opportunities for Jacobs Solutions and Dycom Industries

0.41

Correlation Coefficient

Jacobs Solutions  Dycom Industries

Very weak diversification

The 3 months correlation between Jacobs and Dycom is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Dycom Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dycom Industries 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 Dycom Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dycom Industries has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Dycom Industries go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Dycom Industries

Taking into account the 90-day investment horizon Jacobs Solutions is expected to under-perform the Dycom Industries. But the stock apears to be less risky and, when comparing its historical volatility, Jacobs Solutions is 2.35 times less risky than Dycom Industries. The stock trades about -0.16 of its potential returns per unit of risk. The Dycom Industries is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  18,116  in Dycom Industries on November 28, 2024 and sell it today you would lose (922.00) from holding Dycom Industries or give up 5.09% of portfolio value over 90 days.

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

Jacobs Solutions  vs.  Dycom Industries

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.

Dycom Industries

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Jacobs Solutions and Dycom Industries

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

The idea behind Jacobs Solutions and Dycom Industries 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.