Correlation Between Aecom Technology and Jacobs Solutions
Can any of the company-specific risk be diversified away by investing in both Aecom Technology 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 Aecom Technology and Jacobs Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aecom Technology and Jacobs Solutions, you can compare the effects of market volatilities on Aecom Technology 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 Aecom Technology with a short position of Jacobs Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aecom Technology and Jacobs Solutions.
Diversification Opportunities for Aecom Technology and Jacobs Solutions
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aecom and Jacobs is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aecom Technology and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Aecom Technology 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 Aecom Technology 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 Aecom Technology i.e., Aecom Technology and Jacobs Solutions go up and down completely randomly.
Pair Corralation between Aecom Technology and Jacobs Solutions
Considering the 90-day investment horizon Aecom Technology is expected to generate 1.77 times less return on investment than Jacobs Solutions. But when comparing it to its historical volatility, Aecom Technology is 1.02 times less risky than Jacobs Solutions. It trades about 0.04 of its potential returns per unit of risk. Jacobs Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 12,480 in Jacobs Solutions on January 24, 2024 and sell it today you would earn a total of 1,931 from holding Jacobs Solutions or generate 15.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Aecom Technology vs. Jacobs Solutions
Performance |
Timeline |
Aecom Technology |
Jacobs Solutions |
Aecom Technology and Jacobs Solutions Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aecom Technology and Jacobs Solutions
The main advantage of trading using opposite Aecom Technology and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aecom Technology 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 Aecom Technology 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 CEOs Directory module to screen CEOs from public companies around the world.
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