Correlation Between Sterling Construction and Jacobs Solutions

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

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

Diversification Opportunities for Sterling Construction and Jacobs Solutions

0.68

Correlation Coefficient

Sterling Construction  Jacobs Solutions

Poor diversification

The 3 months correlation between Sterling and Jacobs is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Sterling Construction 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 Sterling Construction 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 Sterling Construction i.e., Sterling Construction and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Sterling Construction and Jacobs Solutions

Given the investment horizon of 90 days Sterling Construction is expected to under-perform the Jacobs Solutions. In addition to that, Sterling Construction is 4.09 times more volatile than Jacobs Solutions. It trades about -0.11 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 28, 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

Sterling Construction  vs.  Jacobs Solutions

Sterling Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sterling Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Sterling Construction and Jacobs Solutions

The main advantage of trading using opposite Sterling Construction and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction 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 Sterling Construction 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.