Correlation Between JB Hunt and Automatic Data

Can any of the company-specific risk be diversified away by investing in both JB Hunt and Automatic Data 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 Automatic Data 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 Automatic Data Processing, you can compare the effects of market volatilities on JB Hunt and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of JB Hunt and Automatic Data.

Diversification Opportunities for JB Hunt and Automatic Data

-0.39

Correlation Coefficient

JB Hunt  Automatic Data

Very good diversification

The 3 months correlation between J1BH34 and Automatic is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding JB Hunt Transport and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of JB Hunt i.e., JB Hunt and Automatic Data go up and down completely randomly.

Pair Corralation between JB Hunt and Automatic Data

Assuming the 90 days trading horizon JB Hunt Transport is expected to generate 0.3 times more return on investment than Automatic Data. However, JB Hunt Transport is 3.28 times less risky than Automatic Data. It trades about 0.14 of its potential returns per unit of risk. Automatic Data Processing is currently generating about -0.07 per unit of risk. If you would invest  2,787  in JB Hunt Transport on December 25, 2024 and sell it today you would earn a total of  98.00  from holding JB Hunt Transport or generate 3.52% return on investment over 90 days.

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

JB Hunt Transport  vs.  Automatic Data Processing

JB Hunt Transport

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hunt Transport are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, JB Hunt is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Automatic Data Processing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Automatic Data Processing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Automatic Data is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with JB Hunt and Automatic Data

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

The idea behind JB Hunt Transport and Automatic Data Processing 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.