Correlation Between Jacobs Solutions and Waste Management

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

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

Diversification Opportunities for Jacobs Solutions and Waste Management

-0.63

Correlation Coefficient

Jacobs Solutions  Waste Management

Excellent diversification

The 3 months correlation between Jacobs and Waste is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Waste Management go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Waste Management

Taking into account the 90-day investment horizon Jacobs Solutions is expected to under-perform the Waste Management. In addition to that, Jacobs Solutions is 1.01 times more volatile than Waste Management. It trades about -0.13 of its total potential returns per unit of risk. Waste Management is currently generating about 0.16 per unit of volatility. If you would invest  20,426  in Waste Management on December 26, 2024 and sell it today you would earn a total of  2,281  from holding Waste Management or generate 11.17% return on investment over 90 days.

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

Jacobs Solutions  vs.  Waste Management

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.

Waste Management

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Waste Management may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Jacobs Solutions and Waste Management

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

The idea behind Jacobs Solutions and Waste Management 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.