Correlation Between Jacobs Solutions and Reservoir Media

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

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

Diversification Opportunities for Jacobs Solutions and Reservoir Media

0.48

Correlation Coefficient

Jacobs Solutions  Reservoir Media

Very weak diversification

The 3 months correlation between Jacobs and Reservoir is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Reservoir Media go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Reservoir Media

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.35 times more return on investment than Reservoir Media. However, Jacobs Solutions is 2.82 times less risky than Reservoir Media. It trades about -0.05 of its potential returns per unit of risk. Reservoir Media is currently generating about -0.02 per unit of risk. If you would invest  13,736  in Jacobs Solutions on September 23, 2024 and sell it today you would lose (161.00) from holding Jacobs Solutions or give up 1.17% of portfolio value over 90 days.

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

Jacobs Solutions  vs.  Reservoir Media

Jacobs Solutions

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 8 (%) 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 January 2025.

Reservoir Media

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Jacobs Solutions and Reservoir Media

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

The idea behind Jacobs Solutions and Reservoir Media 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .