Correlation Between Jacobs Solutions and MI Homes

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

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

Diversification Opportunities for Jacobs Solutions and MI Homes

-0.03

Correlation Coefficient

Jacobs Solutions  MI Homes

Good diversification

The 3 months correlation between Jacobs and MHO is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and MI Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MI Homes 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 MI Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MI Homes has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and MI Homes go up and down completely randomly.

Pair Corralation between Jacobs Solutions and MI Homes

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.66 times more return on investment than MI Homes. However, Jacobs Solutions is 1.53 times less risky than MI Homes. It trades about 0.06 of its potential returns per unit of risk. MI Homes is currently generating about -0.12 per unit of risk. If you would invest  12,883  in Jacobs Solutions on September 26, 2024 and sell it today you would earn a total of  717.00  from holding Jacobs Solutions or generate 5.57% return on investment over 90 days.

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

Jacobs Solutions  vs.  MI Homes

Jacobs Solutions

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

MI Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MI Homes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Jacobs Solutions and MI Homes

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

The idea behind Jacobs Solutions and MI Homes 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.