Correlation Between Jacobs Solutions and Boston Beer

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

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

Diversification Opportunities for Jacobs Solutions and Boston Beer

0.69

Correlation Coefficient

Jacobs Solutions  Boston Beer

Poor diversification

The 3 months correlation between Jacobs and Boston is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Boston Beer go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Boston Beer

Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 1.28 times less return on investment than Boston Beer. In addition to that, Jacobs Solutions is 1.01 times more volatile than Boston Beer. It trades about 0.14 of its total potential returns per unit of risk. Boston Beer is currently generating about 0.18 per unit of volatility. If you would invest  26,979  in Boston Beer on September 12, 2024 and sell it today you would earn a total of  4,917  from holding Boston Beer or generate 18.23% return on investment over 90 days.

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

Jacobs Solutions  vs.  Boston Beer

Jacobs Solutions

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 11 (%) 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.

Boston Beer

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Beer are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Boston Beer displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jacobs Solutions and Boston Beer

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

The idea behind Jacobs Solutions and Boston Beer 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 Transaction History module to view history of all your transactions and understand their impact on performance.