Correlation Between Comfort Systems and Jacobs Solutions

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

By analyzing existing cross correlation between Comfort Systems USA and Jacobs Solutions, you can compare the effects of market volatilities on Comfort Systems 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 Comfort Systems with a short position of Jacobs Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comfort Systems and Jacobs Solutions.

Diversification Opportunities for Comfort Systems and Jacobs Solutions

-0.16

Correlation Coefficient

Comfort Systems  Jacobs Solutions

Good diversification

The 3 months correlation between Comfort and Jacobs is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Comfort Systems USA and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Comfort Systems 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 Comfort Systems USA 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 Comfort Systems i.e., Comfort Systems and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Comfort Systems and Jacobs Solutions

Considering the 90-day investment horizon Comfort Systems USA is expected to generate 1.88 times more return on investment than Jacobs Solutions. However, Comfort Systems is 1.88 times more volatile than Jacobs Solutions. It trades about 0.16 of its potential returns per unit of risk. Jacobs Solutions is currently generating about -0.16 per unit of risk. If you would invest  29,497  in Comfort Systems USA on February 21, 2024 and sell it today you would earn a total of  2,625  from holding Comfort Systems USA or generate 8.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Comfort Systems USA  vs.  Jacobs Solutions

Comfort Systems USA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Comfort Systems USA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, Comfort Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Jacobs Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jacobs Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Comfort Systems and Jacobs Solutions

The main advantage of trading using opposite Comfort Systems and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comfort Systems 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 Comfort Systems USA 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.