Correlation Between Universal Technical and Jacobs Solutions

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

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

Diversification Opportunities for Universal Technical and Jacobs Solutions

0.28

Correlation Coefficient

Universal Technical  Jacobs Solutions

Modest diversification

The 3 months correlation between Universal and Jacobs is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Universal Technical Institute and Jacobs Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jacobs Solutions and Universal Technical 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 Universal Technical Institute 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 Universal Technical i.e., Universal Technical and Jacobs Solutions go up and down completely randomly.

Pair Corralation between Universal Technical and Jacobs Solutions

Considering the 90-day investment horizon Universal Technical Institute is expected to generate 2.27 times more return on investment than Jacobs Solutions. However, Universal Technical is 2.27 times more volatile than Jacobs Solutions. It trades about 0.22 of its potential returns per unit of risk. Jacobs Solutions is currently generating about 0.15 per unit of risk. If you would invest  1,654  in Universal Technical Institute on September 12, 2024 and sell it today you would earn a total of  958.00  from holding Universal Technical Institute or generate 57.92% return on investment over 90 days.

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

Universal Technical Institute  vs.  Jacobs Solutions

Universal Technical

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Technical Institute are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Universal Technical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Jacobs Solutions

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jacobs Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking indicators, Jacobs Solutions revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Technical and Jacobs Solutions

The main advantage of trading using opposite Universal Technical and Jacobs Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Technical 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 Universal Technical Institute 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.