Correlation Between Jacobs Solutions and Ivanhoe Electric

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

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

Diversification Opportunities for Jacobs Solutions and Ivanhoe Electric

0.81

Correlation Coefficient

Jacobs Solutions  Ivanhoe Electric

Very poor diversification

The 3 months correlation between Jacobs and Ivanhoe is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Ivanhoe Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ivanhoe Electric 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 Ivanhoe Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ivanhoe Electric has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Ivanhoe Electric go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Ivanhoe Electric

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.21 times more return on investment than Ivanhoe Electric. However, Jacobs Solutions is 4.69 times less risky than Ivanhoe Electric. It trades about -0.12 of its potential returns per unit of risk. Ivanhoe Electric is currently generating about -0.21 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Jacobs Solutions  vs.  Ivanhoe Electric

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.

Ivanhoe Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ivanhoe Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and 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 Ivanhoe Electric

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

The idea behind Jacobs Solutions and Ivanhoe Electric 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.