Correlation Between Argan and Jacobs Solutions

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

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

Diversification Opportunities for Argan and Jacobs Solutions

0.7

Correlation Coefficient

Argan  Jacobs Solutions

Poor diversification

The 3 months correlation between Argan and Jacobs is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Argan Inc and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Argan 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 Argan 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 Argan i.e., Argan and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Argan and Jacobs Solutions

Considering the 90-day investment horizon Argan Inc is expected to generate 2.06 times more return on investment than Jacobs Solutions. However, Argan is 2.06 times more volatile than Jacobs Solutions. It trades about 0.27 of its potential returns per unit of risk. Jacobs Solutions is currently generating about 0.11 per unit of risk. If you would invest  8,813  in Argan Inc on September 18, 2024 and sell it today you would earn a total of  5,872  from holding Argan Inc or generate 66.63% return on investment over 90 days.

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

Argan Inc  vs.  Jacobs Solutions

Argan Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Argan showed solid returns over the last few months and may actually be approaching a breakup point.

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 weak 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 Argan and Jacobs Solutions

The main advantage of trading using opposite Argan and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argan 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 Argan 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.