Correlation Between Construction Partners and Jacobs Solutions

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

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

Diversification Opportunities for Construction Partners and Jacobs Solutions

0.76

Correlation Coefficient

Construction Partners  Jacobs Solutions

Poor diversification

The 3 months correlation between Construction and Jacobs is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Construction Partners and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Construction Partners 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 Construction Partners are associated (or correlated) with Jacobs Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jacobs Solutions has no effect on the direction of Construction Partners i.e., Construction Partners and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Construction Partners and Jacobs Solutions

Given the investment horizon of 90 days Construction Partners is expected to under-perform the Jacobs Solutions. In addition to that, Construction Partners is 2.78 times more volatile than Jacobs Solutions. It trades about -0.1 of its total potential returns per unit of risk. Jacobs Solutions is currently generating about -0.12 per unit of volatility. If you would invest  13,317  in Jacobs Solutions on December 30, 2024 and sell it today you would lose (1,195) from holding Jacobs Solutions or give up 8.97% of portfolio value over 90 days.

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

Construction Partners  vs.  Jacobs Solutions

Construction Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Construction Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 fragile 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.

Pair Trading with Construction Partners and Jacobs Solutions

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

The idea behind Construction Partners and Jacobs Solutions 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.