Correlation Between Jabil Circuit and Analog Devices

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

By analyzing existing cross correlation between Jabil Circuit and Analog Devices, you can compare the effects of market volatilities on Jabil Circuit and Analog Devices 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 Jabil Circuit with a short position of Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jabil Circuit and Analog Devices.

Diversification Opportunities for Jabil Circuit and Analog Devices

-0.55

Correlation Coefficient

Jabil Circuit  Analog Devices

Excellent diversification

The 3 months correlation between Jabil and Analog is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Jabil Circuit and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Jabil Circuit 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 Jabil Circuit are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Jabil Circuit i.e., Jabil Circuit and Analog Devices go up and down completely randomly.

Pair Corralation between Jabil Circuit and Analog Devices

Considering the 90-day investment horizon Jabil Circuit is expected to generate 1.28 times more return on investment than Analog Devices. However, Jabil Circuit is 1.28 times more volatile than Analog Devices. It trades about 0.07 of its potential returns per unit of risk. Analog Devices is currently generating about 0.05 per unit of risk. If you would invest  7,895  in Jabil Circuit on October 11, 2024 and sell it today you would earn a total of  7,500  from holding Jabil Circuit or generate 95.0% return on investment over 90 days.

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

Jabil Circuit  vs.  Analog Devices

Jabil Circuit

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jabil Circuit are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, Jabil Circuit disclosed solid returns over the last few months and may actually be approaching a breakup point.

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Jabil Circuit and Analog Devices

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

The idea behind Jabil Circuit and Analog Devices 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.