Correlation Between JB Hunt and New Oriental

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

Diversification Opportunities for JB Hunt and New Oriental

-0.45

Correlation Coefficient

JB Hunt  New Oriental

Very good diversification

The 3 months correlation between J1BH34 and New is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding JB Hunt Transport and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education 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 New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of JB Hunt i.e., JB Hunt and New Oriental go up and down completely randomly.

Pair Corralation between JB Hunt and New Oriental

Assuming the 90 days trading horizon JB Hunt is expected to generate 4.53 times less return on investment than New Oriental. But when comparing it to its historical volatility, JB Hunt Transport is 2.6 times less risky than New Oriental. It trades about 0.01 of its potential returns per unit of risk. New Oriental Education is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,519  in New Oriental Education on October 9, 2024 and sell it today you would earn a total of  64.00  from holding New Oriental Education or generate 2.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

JB Hunt Transport  vs.  New Oriental Education

JB Hunt Transport

Risk-Adjusted Performance

10 of 100

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.

New Oriental Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Oriental Education has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, New Oriental 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 New Oriental

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

The idea behind JB Hunt Transport and New Oriental Education 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.