Correlation Between VARNO and Jacobs Solutions

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

By analyzing existing cross correlation between VARNO 75 15 JAN 28 and Jacobs Solutions, you can compare the effects of market volatilities on VARNO 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 VARNO with a short position of Jacobs Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARNO and Jacobs Solutions.

Diversification Opportunities for VARNO and Jacobs Solutions

-0.39

Correlation Coefficient

VARNO  Jacobs Solutions

Very good diversification

The 3 months correlation between VARNO and Jacobs is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding VARNO 75 15 JAN 28 and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and VARNO 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 VARNO 75 15 JAN 28 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 VARNO i.e., VARNO and Jacobs Solutions go up and down completely randomly.

Pair Corralation between VARNO and Jacobs Solutions

Assuming the 90 days trading horizon VARNO is expected to generate 13.87 times less return on investment than Jacobs Solutions. But when comparing it to its historical volatility, VARNO 75 15 JAN 28 is 4.38 times less risky than Jacobs Solutions. It trades about 0.02 of its potential returns per unit of risk. Jacobs Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,144  in Jacobs Solutions on September 12, 2024 and sell it today you would earn a total of  3,464  from holding Jacobs Solutions or generate 34.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	74.72%
Values	Daily Returns

VARNO 75 15 JAN 28  vs.  Jacobs Solutions

VARNO 75 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARNO 75 15 JAN 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VARNO is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Jacobs Solutions

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, Jacobs Solutions revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VARNO and Jacobs Solutions

The main advantage of trading using opposite VARNO and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VARNO 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 VARNO 75 15 JAN 28 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.