Correlation Between Universal and Jacobs Solutions

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

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

Diversification Opportunities for Universal and Jacobs Solutions

0.15

Correlation Coefficient

Universal  Jacobs Solutions

Average diversification

The 3 months correlation between Universal and Jacobs is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Universal and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Universal 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 Universal 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 Universal i.e., Universal and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Universal and Jacobs Solutions

Considering the 90-day investment horizon Universal is expected to generate 1.76 times less return on investment than Jacobs Solutions. But when comparing it to its historical volatility, Universal is 1.15 times less risky than Jacobs Solutions. It trades about 0.1 of its potential returns per unit of risk. Jacobs Solutions is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  12,261  in Jacobs Solutions on September 3, 2024 and sell it today you would earn a total of  1,862  from holding Jacobs Solutions or generate 15.19% return on investment over 90 days.

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

Universal  vs.  Jacobs Solutions

Universal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Universal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Universal and Jacobs Solutions

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

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.