Correlation Between Jacobs Solutions and Arm Holdings

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

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

Diversification Opportunities for Jacobs Solutions and Arm Holdings

0.17

Correlation Coefficient

Jacobs Solutions  Arm Holdings

Average diversification

The 3 months correlation between Jacobs and Arm is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc and Jacobs Solutions 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 Jacobs Solutions are associated (or correlated) with Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Arm Holdings go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Arm Holdings

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 0.5 times more return on investment than Arm Holdings. However, Jacobs Solutions is 2.0 times less risky than Arm Holdings. It trades about 0.14 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.02 per unit of risk. If you would invest  11,995  in Jacobs Solutions on September 13, 2024 and sell it today you would earn a total of  1,608  from holding Jacobs Solutions or generate 13.41% return on investment over 90 days.

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

Jacobs Solutions  vs.  Arm Holdings plc

Jacobs Solutions

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 10 (%) 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.

Arm Holdings plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Arm Holdings is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Jacobs Solutions and Arm Holdings

The main advantage of trading using opposite Jacobs Solutions and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacobs Solutions position performs unexpectedly, Arm Holdings 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.

The idea behind Jacobs Solutions and Arm Holdings plc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.