Correlation Between Jacobs Solutions and Hongli Group

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

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

Diversification Opportunities for Jacobs Solutions and Hongli Group

-0.5

Correlation Coefficient

Jacobs Solutions  Hongli Group

Very good diversification

The 3 months correlation between Jacobs and Hongli is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Hongli Group Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongli Group Ordinary 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 Hongli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongli Group Ordinary has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Hongli Group go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Hongli Group

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.26 times more return on investment than Hongli Group. However, Jacobs Solutions is 3.87 times less risky than Hongli Group. It trades about -0.12 of its potential returns per unit of risk. Hongli Group Ordinary is currently generating about -0.07 per unit of risk. If you would invest  13,608  in Jacobs Solutions on October 11, 2024 and sell it today you would lose (298.00) from holding Jacobs Solutions or give up 2.19% 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.  Hongli Group Ordinary

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.

Hongli Group Ordinary

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hongli Group Ordinary are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, Hongli Group is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Jacobs Solutions and Hongli Group

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

The idea behind Jacobs Solutions and Hongli Group Ordinary 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..