Correlation Between JB Hunt and John Wood

Can any of the company-specific risk be diversified away by investing in both JB Hunt and John Wood 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 JB Hunt and John Wood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JB Hunt Transport and John Wood Group, you can compare the effects of market volatilities on JB Hunt and John Wood 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 JB Hunt with a short position of John Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of JB Hunt and John Wood.

Diversification Opportunities for JB Hunt and John Wood

0.64

Correlation Coefficient

JB Hunt  John Wood

Poor diversification

The 3 months correlation between 0J71 and John is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding JB Hunt Transport and John Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Wood Group and JB Hunt 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 JB Hunt Transport are associated (or correlated) with John Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Wood Group has no effect on the direction of JB Hunt i.e., JB Hunt and John Wood go up and down completely randomly.

Pair Corralation between JB Hunt and John Wood

Assuming the 90 days trading horizon JB Hunt Transport is expected to under-perform the John Wood. But the stock apears to be less risky and, when comparing its historical volatility, JB Hunt Transport is 5.96 times less risky than John Wood. The stock trades about -0.1 of its potential returns per unit of risk. The John Wood Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,470  in John Wood Group on December 28, 2024 and sell it today you would lose (2,380) from holding John Wood Group or give up 36.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

JB Hunt Transport  vs.  John Wood Group

JB Hunt Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days JB Hunt Transport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

John Wood Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days John Wood Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, John Wood is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with JB Hunt and John Wood

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

The idea behind JB Hunt Transport and John Wood 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.