Correlation Between JB Hunt and Hormel Foods

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

Diversification Opportunities for JB Hunt and Hormel Foods

0.71

Correlation Coefficient

JB Hunt  Hormel Foods

Poor diversification

The 3 months correlation between J1BH34 and Hormel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding JB Hunt Transport and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods 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 Hormel Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hormel Foods has no effect on the direction of JB Hunt i.e., JB Hunt and Hormel Foods go up and down completely randomly.

Pair Corralation between JB Hunt and Hormel Foods

Assuming the 90 days trading horizon JB Hunt is expected to generate 53.42 times less return on investment than Hormel Foods. But when comparing it to its historical volatility, JB Hunt Transport is 50.5 times less risky than Hormel Foods. It trades about 0.13 of its potential returns per unit of risk. Hormel Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  16,996  in Hormel Foods on October 9, 2024 and sell it today you would earn a total of  1,666  from holding Hormel Foods or generate 9.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

JB Hunt Transport  vs.  Hormel Foods

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.

Hormel Foods

Risk-Adjusted Performance

10 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hormel Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with JB Hunt and Hormel Foods

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

The idea behind JB Hunt Transport and Hormel Foods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.