Correlation Between Jacobs Solutions and Western Acquisition

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

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

Diversification Opportunities for Jacobs Solutions and Western Acquisition

0.19

Correlation Coefficient

Jacobs Solutions  Western Acquisition

Average diversification

The 3 months correlation between Jacobs and Western is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Western Acquisition go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Western Acquisition

Taking into account the 90-day investment horizon Jacobs Solutions is expected to under-perform the Western Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Jacobs Solutions is 2.25 times less risky than Western Acquisition. The stock trades about -0.22 of its potential returns per unit of risk. The Western Acquisition Ventures is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Western Acquisition Ventures on October 15, 2024 and sell it today you would earn a total of  119.00  from holding Western Acquisition Ventures or generate 10.82% return on investment over 90 days.

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

Jacobs Solutions  vs.  Western Acquisition Ventures

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.

Western Acquisition

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Jacobs Solutions and Western Acquisition

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

The idea behind Jacobs Solutions and Western Acquisition Ventures 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.