Correlation Between Hub and Air T

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

By analyzing existing cross correlation between Hub Group and Air T Inc, you can compare the effects of market volatilities on Hub and Air T 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 Hub with a short position of Air T. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hub and Air T.

Diversification Opportunities for Hub and Air T

0.63

Correlation Coefficient

Hub  Air T

Poor diversification

The 3 months correlation between Hub and Air is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hub Group and Air T Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air T Inc and Hub 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 Hub Group are associated (or correlated) with Air T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air T Inc has no effect on the direction of Hub i.e., Hub and Air T go up and down completely randomly.

Pair Corralation between Hub and Air T

Given the investment horizon of 90 days Hub Group is expected to generate 1.71 times more return on investment than Air T. However, Hub is 1.71 times more volatile than Air T Inc. It trades about 0.11 of its potential returns per unit of risk. Air T Inc is currently generating about 0.06 per unit of risk. If you would invest  4,578  in Hub Group on September 3, 2024 and sell it today you would earn a total of  586.00  from holding Hub Group or generate 12.8% return on investment over 90 days.

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

Hub Group  vs.  Air T Inc

Hub Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hub Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, Hub reported solid returns over the last few months and may actually be approaching a breakup point.

Air T Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air T Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Air T is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hub and Air T

The main advantage of trading using opposite Hub and Air T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hub position performs unexpectedly, Air T 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 Air T will offset losses from the drop in Air T's long position.

The idea behind Hub Group and Air T Inc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.