Correlation Between JB Hunt and Tesla

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

Diversification Opportunities for JB Hunt and Tesla

0.85

Correlation Coefficient

JB Hunt  Tesla

Very poor diversification

The 3 months correlation between J1BH34 and Tesla is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding JB Hunt Transport and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of JB Hunt i.e., JB Hunt and Tesla go up and down completely randomly.

Pair Corralation between JB Hunt and Tesla

Assuming the 90 days trading horizon JB Hunt is expected to generate 342.6 times less return on investment than Tesla. But when comparing it to its historical volatility, JB Hunt Transport is 179.1 times less risky than Tesla. It trades about 0.16 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  4,527  in Tesla Inc on October 6, 2024 and sell it today you would earn a total of  3,384  from holding Tesla Inc or generate 74.75% return on investment over 90 days.

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

JB Hunt Transport  vs.  Tesla Inc

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.

Tesla Inc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JB Hunt and Tesla

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

The idea behind JB Hunt Transport and Tesla 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.