Correlation Between Willamette Valley and Jacobs Solutions

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

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

Diversification Opportunities for Willamette Valley and Jacobs Solutions

-0.17

Correlation Coefficient

Willamette Valley  Jacobs Solutions

Good diversification

The 3 months correlation between Willamette and Jacobs is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Willamette Valley and Jacobs Solutions

Assuming the 90 days horizon Willamette Valley Vineyards is expected to under-perform the Jacobs Solutions. In addition to that, Willamette Valley is 2.14 times more volatile than Jacobs Solutions. It trades about -0.02 of its total potential returns per unit of risk. Jacobs Solutions is currently generating about -0.03 per unit of volatility. If you would invest  13,700  in Jacobs Solutions on October 9, 2024 and sell it today you would lose (413.00) from holding Jacobs Solutions or give up 3.01% of portfolio value over 90 days.

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

Willamette Valley Vineyards  vs.  Jacobs Solutions

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Willamette Valley is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail 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 Willamette Valley and Jacobs Solutions

The main advantage of trading using opposite Willamette Valley and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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 Willamette Valley Vineyards 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.