Correlation Between Jacobs Solutions and Manulife Financial

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

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

Diversification Opportunities for Jacobs Solutions and Manulife Financial

-0.07

Correlation Coefficient

Jacobs Solutions  Manulife Financial

Good diversification

The 3 months correlation between Jacobs and Manulife is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Manulife Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife Financial 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 Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Manulife Financial go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Manulife Financial

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 1.59 times more return on investment than Manulife Financial. However, Jacobs Solutions is 1.59 times more volatile than Manulife Financial. It trades about 0.15 of its potential returns per unit of risk. Manulife Financial is currently generating about -0.1 per unit of risk. If you would invest  11,874  in Jacobs Solutions on September 12, 2024 and sell it today you would earn a total of  1,734  from holding Jacobs Solutions or generate 14.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Jacobs Solutions  vs.  Manulife Financial

Jacobs Solutions

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, Jacobs Solutions revealed solid returns over the last few months and may actually be approaching a breakup point.

Manulife Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Jacobs Solutions and Manulife Financial

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

The idea behind Jacobs Solutions and Manulife Financial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.