Correlation Between Jacobs Solutions and ALTRIA

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

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

Diversification Opportunities for Jacobs Solutions and ALTRIA

0.27

Correlation Coefficient

Jacobs Solutions  ALTRIA

Modest diversification

The 3 months correlation between Jacobs and ALTRIA is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and ALTRIA GROUP INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALTRIA GROUP 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 ALTRIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALTRIA GROUP INC has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and ALTRIA go up and down completely randomly.

Pair Corralation between Jacobs Solutions and ALTRIA

Taking into account the 90-day investment horizon Jacobs Solutions is expected to under-perform the ALTRIA. In addition to that, Jacobs Solutions is 2.41 times more volatile than ALTRIA GROUP INC. It trades about -0.15 of its total potential returns per unit of risk. ALTRIA GROUP INC is currently generating about -0.03 per unit of volatility. If you would invest  9,942  in ALTRIA GROUP INC on December 22, 2024 and sell it today you would lose (108.00) from holding ALTRIA GROUP INC or give up 1.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Jacobs Solutions  vs.  ALTRIA GROUP INC

Jacobs Solutions

Risk-Adjusted Performance

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 latest weak performance, the Stock's forward-looking indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

ALTRIA GROUP INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALTRIA GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ALTRIA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Jacobs Solutions and ALTRIA

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

The idea behind Jacobs Solutions and ALTRIA GROUP 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.