Correlation Between JB Hunt and Morgan Stanley

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

Diversification Opportunities for JB Hunt and Morgan Stanley

0.88

Correlation Coefficient

JB Hunt  Morgan Stanley

Very poor diversification

The 3 months correlation between J1BH34 and Morgan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding JB Hunt Transport and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of JB Hunt i.e., JB Hunt and Morgan Stanley go up and down completely randomly.

Pair Corralation between JB Hunt and Morgan Stanley

Assuming the 90 days trading horizon JB Hunt is expected to generate 9.96 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, JB Hunt Transport is 1.75 times less risky than Morgan Stanley. It trades about 0.01 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,717  in Morgan Stanley on October 4, 2024 and sell it today you would earn a total of  6,874  from holding Morgan Stanley or generate 78.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.99%
Values	Daily Returns

JB Hunt Transport  vs.  Morgan Stanley

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Morgan Stanley

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Morgan Stanley sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JB Hunt and Morgan Stanley

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

The idea behind JB Hunt Transport and Morgan Stanley 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 Anywhere module to track or share privately all of your investments from the convenience of any device.