Correlation Between Jacobs Solutions and Sphere Entertainment

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

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

Diversification Opportunities for Jacobs Solutions and Sphere Entertainment

0.47

Correlation Coefficient

Jacobs Solutions  Sphere Entertainment

Very weak diversification

The 3 months correlation between Jacobs and Sphere is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Sphere Entertainment

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 2.56 times less return on investment than Sphere Entertainment. But when comparing it to its historical volatility, Jacobs Solutions is 2.47 times less risky than Sphere Entertainment. It trades about 0.05 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,232  in Sphere Entertainment Co on October 11, 2024 and sell it today you would earn a total of  1,905  from holding Sphere Entertainment Co or generate 85.35% return on investment over 90 days.

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

Jacobs Solutions  vs.  Sphere Entertainment Co

Jacobs Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jacobs Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Jacobs Solutions and Sphere Entertainment

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

The idea behind Jacobs Solutions and Sphere Entertainment Co 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.