Correlation Between CONSOLIDATED and Jacobs Solutions

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

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

Diversification Opportunities for CONSOLIDATED and Jacobs Solutions

0.12

Correlation Coefficient

CONSOLIDATED  Jacobs Solutions

Average diversification

The 3 months correlation between CONSOLIDATED and Jacobs is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CONSOLIDATED EDISON N and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and CONSOLIDATED 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 CONSOLIDATED EDISON N 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 CONSOLIDATED i.e., CONSOLIDATED and Jacobs Solutions go up and down completely randomly.

Pair Corralation between CONSOLIDATED and Jacobs Solutions

Assuming the 90 days trading horizon CONSOLIDATED EDISON N is expected to under-perform the Jacobs Solutions. In addition to that, CONSOLIDATED is 1.11 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 0.21 per unit of volatility. If you would invest  13,528  in Jacobs Solutions on October 24, 2024 and sell it today you would earn a total of  398.00  from holding Jacobs Solutions or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	38.89%
Values	Daily Returns

CONSOLIDATED EDISON N  vs.  Jacobs Solutions

CONSOLIDATED EDISON

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSOLIDATED EDISON N has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CONSOLIDATED is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with CONSOLIDATED and Jacobs Solutions

The main advantage of trading using opposite CONSOLIDATED and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CONSOLIDATED 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 CONSOLIDATED EDISON N 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.