Correlation Between Jacobs Solutions and Federal Signal
Can any of the company-specific risk be diversified away by investing in both Jacobs Solutions and Federal Signal 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 Federal Signal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jacobs Solutions and Federal Signal, you can compare the effects of market volatilities on Jacobs Solutions and Federal Signal 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 Federal Signal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jacobs Solutions and Federal Signal.
Diversification Opportunities for Jacobs Solutions and Federal Signal
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Jacobs and Federal is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Federal Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Signal 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 Federal Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Signal has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Federal Signal go up and down completely randomly.
Pair Corralation between Jacobs Solutions and Federal Signal
Taking into account the 90-day investment horizon Jacobs Solutions is expected to generate 1.52 times less return on investment than Federal Signal. But when comparing it to its historical volatility, Jacobs Solutions is 1.61 times less risky than Federal Signal. It trades about 0.11 of its potential returns per unit of risk. Federal Signal is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 9,135 in Federal Signal on October 20, 2024 and sell it today you would earn a total of 585.00 from holding Federal Signal or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jacobs Solutions vs. Federal Signal
Performance |
| Timeline |
| Jacobs Solutions |
| Federal Signal |
Jacobs Solutions and Federal Signal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jacobs Solutions and Federal Signal
The main advantage of trading using opposite Jacobs Solutions and Federal Signal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jacobs Solutions position performs unexpectedly, Federal Signal 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 Federal Signal will offset losses from the drop in Federal Signal's long position.| Jacobs Solutions vs. KBR Inc | Jacobs Solutions vs. Tetra Tech | Jacobs Solutions vs. Fluor | Jacobs Solutions vs. Topbuild Corp |
| Federal Signal vs. Energy Recovery | Federal Signal vs. CECO Environmental Corp | Federal Signal vs. 374Water Common Stock | Federal Signal vs. CO2 Solutions |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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