Correlation Between Old Republic and Jacobs Solutions

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

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

Diversification Opportunities for Old Republic and Jacobs Solutions

0.28

Correlation Coefficient

Old Republic  Jacobs Solutions

Modest diversification

The 3 months correlation between Old and Jacobs is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Old Republic 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 Old Republic International 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 Old Republic i.e., Old Republic and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Old Republic and Jacobs Solutions

Considering the 90-day investment horizon Old Republic is expected to generate 4.28 times less return on investment than Jacobs Solutions. But when comparing it to its historical volatility, Old Republic International is 1.15 times less risky than Jacobs Solutions. It trades about 0.03 of its potential returns per unit of risk. Jacobs Solutions is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,385  in Jacobs Solutions on September 20, 2024 and sell it today you would earn a total of  1,081  from holding Jacobs Solutions or generate 8.73% return on investment over 90 days.

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

Old Republic International  vs.  Jacobs Solutions

Old Republic Interna

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Old Republic is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Jacobs Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 7 (%) 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 Old Republic and Jacobs Solutions

The main advantage of trading using opposite Old Republic and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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 Old Republic International 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.