Correlation Between Jacobs Solutions and LB Foster

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

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

Diversification Opportunities for Jacobs Solutions and LB Foster

-0.45

Correlation Coefficient

Jacobs Solutions  LB Foster

Very good diversification

The 3 months correlation between Jacobs and FSTR is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster 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 LB Foster. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LB Foster has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and LB Foster go up and down completely randomly.

Pair Corralation between Jacobs Solutions and LB Foster

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.39 times more return on investment than LB Foster. However, Jacobs Solutions is 2.57 times less risky than LB Foster. It trades about -0.18 of its potential returns per unit of risk. LB Foster is currently generating about -0.09 per unit of risk. If you would invest  13,615  in Jacobs Solutions on October 9, 2024 and sell it today you would lose (430.00) from holding Jacobs Solutions or give up 3.16% of portfolio value over 90 days.

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

Jacobs Solutions  vs.  LB Foster

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.

LB Foster

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, LB Foster reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jacobs Solutions and LB Foster

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

The idea behind Jacobs Solutions and LB Foster 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.