Correlation Between KINDER and Jacobs Solutions

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

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

Diversification Opportunities for KINDER and Jacobs Solutions

-0.02

Correlation Coefficient

KINDER  Jacobs Solutions

Good diversification

The 3 months correlation between KINDER and Jacobs is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN INC and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and KINDER 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 KINDER MORGAN INC 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 KINDER i.e., KINDER and Jacobs Solutions go up and down completely randomly.

Pair Corralation between KINDER and Jacobs Solutions

Assuming the 90 days trading horizon KINDER MORGAN INC is expected to generate 68.25 times more return on investment than Jacobs Solutions. However, KINDER is 68.25 times more volatile than Jacobs Solutions. It trades about 0.08 of its potential returns per unit of risk. Jacobs Solutions is currently generating about 0.05 per unit of risk. If you would invest  8,648  in KINDER MORGAN INC on September 23, 2024 and sell it today you would earn a total of  518.00  from holding KINDER MORGAN INC or generate 5.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.15%
Values	Daily Returns

KINDER MORGAN INC  vs.  Jacobs Solutions

KINDER MORGAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward-looking indicators, Jacobs Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KINDER and Jacobs Solutions

The main advantage of trading using opposite KINDER and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINDER 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 KINDER MORGAN INC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.