Correlation Between Nike and Jacobs Solutions
Can any of the company-specific risk be diversified away by investing in both Nike 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 Nike and Jacobs Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Jacobs Solutions, you can compare the effects of market volatilities on Nike 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 Nike with a short position of Jacobs Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Jacobs Solutions.
Diversification Opportunities for Nike and Jacobs Solutions
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nike and Jacobs is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Nike 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 Nike 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 Nike i.e., Nike and Jacobs Solutions go up and down completely randomly.
Pair Corralation between Nike and Jacobs Solutions
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Jacobs Solutions. In addition to that, Nike is 1.65 times more volatile than Jacobs Solutions. It trades about -0.06 of its total potential returns per unit of risk. Jacobs Solutions is currently generating about 0.09 per unit of volatility. If you would invest 10,617 in Jacobs Solutions on September 4, 2024 and sell it today you would earn a total of 3,370 from holding Jacobs Solutions or generate 31.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Nike Inc vs. Jacobs Solutions
Performance |
| Timeline |
| Nike Inc |
| Jacobs Solutions |
Nike and Jacobs Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Jacobs Solutions
The main advantage of trading using opposite Nike and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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