Correlation Between Jacobs Solutions and Quanta Services

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

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

Diversification Opportunities for Jacobs Solutions and Quanta Services

0.84

Correlation Coefficient

Jacobs Solutions  Quanta Services

Very poor diversification

The 3 months correlation between Jacobs and Quanta is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Quanta Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Services 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 Quanta Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Services has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Quanta Services go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Quanta Services

Taking into account the 90-day investment horizon Jacobs Solutions is expected to under-perform the Quanta Services. In addition to that, Jacobs Solutions is 1.35 times more volatile than Quanta Services. It trades about -0.01 of its total potential returns per unit of risk. Quanta Services is currently generating about 0.27 per unit of volatility. If you would invest  31,343  in Quanta Services on August 30, 2024 and sell it today you would earn a total of  3,051  from holding Quanta Services or generate 9.73% return on investment over 90 days.

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

Jacobs Solutions  vs.  Quanta Services

Jacobs Solutions

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, Jacobs Solutions may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Quanta Services

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quanta Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Quanta Services reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jacobs Solutions and Quanta Services

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

The idea behind Jacobs Solutions and Quanta Services 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.