Correlation Between Jacobs Solutions and Globalfoundries

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

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

Diversification Opportunities for Jacobs Solutions and Globalfoundries

0.3

Correlation Coefficient

Jacobs Solutions  Globalfoundries

Weak diversification

The 3 months correlation between Jacobs and Globalfoundries is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Globalfoundries go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Globalfoundries

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 1.17 times less return on investment than Globalfoundries. But when comparing it to its historical volatility, Jacobs Solutions is 2.2 times less risky than Globalfoundries. It trades about 0.13 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,919  in Globalfoundries on September 14, 2024 and sell it today you would earn a total of  479.00  from holding Globalfoundries or generate 12.22% return on investment over 90 days.

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

Jacobs Solutions  vs.  Globalfoundries

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.

Globalfoundries

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jacobs Solutions and Globalfoundries

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

The idea behind Jacobs Solutions and Globalfoundries 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 Directory module to find actively traded commodities issued by global exchanges.