Correlation Between JB Hunt and Royal Mail

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

Diversification Opportunities for JB Hunt and Royal Mail

-0.71

Correlation Coefficient

JB Hunt  Royal Mail

Pay attention - limited upside

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

Pair Corralation between JB Hunt and Royal Mail

Given the investment horizon of 90 days JB Hunt Transport is expected to generate 2.34 times more return on investment than Royal Mail. However, JB Hunt is 2.34 times more volatile than Royal Mail PLC. It trades about 0.1 of its potential returns per unit of risk. Royal Mail PLC is currently generating about -0.01 per unit of risk. If you would invest  17,270  in JB Hunt Transport on August 31, 2024 and sell it today you would earn a total of  1,761  from holding JB Hunt Transport or generate 10.2% return on investment over 90 days.

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

JB Hunt Transport  vs.  Royal Mail PLC

JB Hunt Transport

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hunt Transport are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, JB Hunt may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Royal Mail PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Mail PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Royal Mail 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 Royal Mail

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

The idea behind JB Hunt Transport and Royal Mail PLC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.