Correlation Between Amgen and Jacobs Solutions
Can any of the company-specific risk be diversified away by investing in both Amgen 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 Amgen and Jacobs Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amgen Inc and Jacobs Solutions, you can compare the effects of market volatilities on Amgen 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 Amgen with a short position of Jacobs Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amgen and Jacobs Solutions.
Diversification Opportunities for Amgen and Jacobs Solutions
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Amgen and Jacobs is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Amgen Inc and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Amgen 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 Amgen Inc 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 Amgen i.e., Amgen and Jacobs Solutions go up and down completely randomly.
Pair Corralation between Amgen and Jacobs Solutions
Given the investment horizon of 90 days Amgen Inc is expected to generate 1.16 times more return on investment than Jacobs Solutions. However, Amgen is 1.16 times more volatile than Jacobs Solutions. It trades about 0.41 of its potential returns per unit of risk. Jacobs Solutions is currently generating about 0.26 per unit of risk. If you would invest 25,928 in Amgen Inc on November 3, 2024 and sell it today you would earn a total of 2,614 from holding Amgen Inc or generate 10.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amgen Inc vs. Jacobs Solutions
Performance |
| Timeline |
| Amgen Inc |
| Jacobs Solutions |
Amgen and Jacobs Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amgen and Jacobs Solutions
The main advantage of trading using opposite Amgen and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amgen 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 Amgen Inc 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.| Jacobs Solutions vs. KBR Inc | Jacobs Solutions vs. Tetra Tech | Jacobs Solutions vs. Fluor | Jacobs Solutions vs. Topbuild Corp |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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