Correlation Between Jacobs Solutions and RELIANCE

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

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

Diversification Opportunities for Jacobs Solutions and RELIANCE

0.24

Correlation Coefficient

Jacobs Solutions  RELIANCE

Modest diversification

The 3 months correlation between Jacobs and RELIANCE is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and RELIANCE STL ALUM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STL ALUM 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 RELIANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STL ALUM has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and RELIANCE go up and down completely randomly.

Pair Corralation between Jacobs Solutions and RELIANCE

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.75 times more return on investment than RELIANCE. However, Jacobs Solutions is 1.34 times less risky than RELIANCE. It trades about 0.05 of its potential returns per unit of risk. RELIANCE STL ALUM is currently generating about -0.01 per unit of risk. If you would invest  10,005  in Jacobs Solutions on October 9, 2024 and sell it today you would earn a total of  3,282  from holding Jacobs Solutions or generate 32.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	34.95%
Values	Daily Returns

Jacobs Solutions  vs.  RELIANCE STL ALUM

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.

RELIANCE STL ALUM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RELIANCE STL ALUM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for RELIANCE STL ALUM investors.

Pair Trading with Jacobs Solutions and RELIANCE

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

The idea behind Jacobs Solutions and RELIANCE STL ALUM 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.