Correlation Between Jacobs Solutions and RXO

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

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

Diversification Opportunities for Jacobs Solutions and RXO

0.69

Correlation Coefficient

Jacobs Solutions  RXO

Poor diversification

The 3 months correlation between Jacobs and RXO is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and RXO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RXO Inc 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 RXO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RXO Inc has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and RXO go up and down completely randomly.

Pair Corralation between Jacobs Solutions and RXO

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 1.97 times less return on investment than RXO. But when comparing it to its historical volatility, Jacobs Solutions is 1.91 times less risky than RXO. It trades about 0.06 of its potential returns per unit of risk. RXO Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,688  in RXO Inc on September 4, 2024 and sell it today you would earn a total of  1,315  from holding RXO Inc or generate 77.9% return on investment over 90 days.

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

Jacobs Solutions  vs.  RXO Inc

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.

RXO Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RXO Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, RXO may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Jacobs Solutions and RXO

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

The idea behind Jacobs Solutions and RXO Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.