Correlation Between Jacobs Solutions and Comfort Systems

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

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

Diversification Opportunities for Jacobs Solutions and Comfort Systems

0.85

Correlation Coefficient

Jacobs Solutions  Comfort Systems

Very poor diversification

The 3 months correlation between Jacobs and Comfort is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Comfort Systems USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comfort Systems USA 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 Comfort Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comfort Systems USA has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Comfort Systems go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Comfort Systems

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.24 times more return on investment than Comfort Systems. However, Jacobs Solutions is 4.15 times less risky than Comfort Systems. It trades about -0.1 of its potential returns per unit of risk. Comfort Systems USA is currently generating about -0.06 per unit of risk. If you would invest  13,317  in Jacobs Solutions on December 28, 2024 and sell it today you would lose (920.00) from holding Jacobs Solutions or give up 6.91% of portfolio value over 90 days.

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

Jacobs Solutions  vs.  Comfort Systems USA

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 fragile 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.

Comfort Systems USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Comfort Systems USA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Jacobs Solutions and Comfort Systems

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

The idea behind Jacobs Solutions and Comfort Systems USA 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.