Correlation Between Jacobs Solutions and Liberty Broadband

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

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

Diversification Opportunities for Jacobs Solutions and Liberty Broadband

0.29

Correlation Coefficient

Jacobs Solutions  Liberty Broadband

Modest diversification

The 3 months correlation between Jacobs and Liberty is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Liberty Broadband Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Broadband Corp 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 Liberty Broadband. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Broadband Corp has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Liberty Broadband go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Liberty Broadband

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 1.36 times more return on investment than Liberty Broadband. However, Jacobs Solutions is 1.36 times more volatile than Liberty Broadband Corp. It trades about 0.05 of its potential returns per unit of risk. Liberty Broadband Corp is currently generating about 0.04 per unit of risk. If you would invest  10,053  in Jacobs Solutions on September 4, 2024 and sell it today you would earn a total of  3,747  from holding Jacobs Solutions or generate 37.27% 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.  Liberty Broadband Corp

Jacobs Solutions

Risk-Adjusted Performance

10 of 100

Good

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.

Liberty Broadband Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Broadband Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Liberty Broadband is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Jacobs Solutions and Liberty Broadband

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

The idea behind Jacobs Solutions and Liberty Broadband Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.