Correlation Between Jacobs Solutions and Parsley Energy

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

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

Diversification Opportunities for Jacobs Solutions and Parsley Energy

0.0

Correlation Coefficient

Jacobs Solutions  Parsley Energy

Pay attention - limited upside

The 3 months correlation between Jacobs and Parsley is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Parsley Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parsley Energy 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 Parsley Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parsley Energy has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Parsley Energy go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Parsley Energy

If you would invest  12,866  in Jacobs Solutions on January 31, 2024 and sell it today you would earn a total of  1,719  from holding Jacobs Solutions or generate 13.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Jacobs Solutions  vs.  Parsley Energy

Jacobs Solutions

Risk-Adjusted Performance

10 of 100

Modest

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 may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Parsley Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parsley Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Parsley Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Jacobs Solutions and Parsley Energy

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

The idea behind Jacobs Solutions and Parsley Energy 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.