Correlation Between Jacobs Solutions and Alaska Air

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

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

Diversification Opportunities for Jacobs Solutions and Alaska Air

0.34

Correlation Coefficient

Jacobs Solutions  Alaska Air

Weak diversification

The 3 months correlation between Jacobs and Alaska is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Jacobs Solutions and Alaska Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alaska Air Group 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 Alaska Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alaska Air Group has no effect on the direction of Jacobs Solutions i.e., Jacobs Solutions and Alaska Air go up and down completely randomly.

Pair Corralation between Jacobs Solutions and Alaska Air

Taking into account the 90-day investment horizon Jacobs Solutions is expected to under-perform the Alaska Air. But the stock apears to be less risky and, when comparing its historical volatility, Jacobs Solutions is 2.69 times less risky than Alaska Air. The stock trades about -0.27 of its potential returns per unit of risk. The Alaska Air Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,307  in Alaska Air Group on January 30, 2024 and sell it today you would earn a total of  89.00  from holding Alaska Air Group or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Jacobs Solutions  vs.  Alaska Air Group

Jacobs Solutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady forward-looking indicators, Jacobs Solutions is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Alaska Air Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Air Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Alaska Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jacobs Solutions and Alaska Air

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

The idea behind Jacobs Solutions and Alaska Air Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.