Correlation Between Marvell Technology and JB Hunt

Can any of the company-specific risk be diversified away by investing in both Marvell Technology and JB Hunt 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 Marvell Technology and JB Hunt into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marvell Technology and JB Hunt Transport, you can compare the effects of market volatilities on Marvell Technology and JB Hunt 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 Marvell Technology with a short position of JB Hunt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marvell Technology and JB Hunt.

Diversification Opportunities for Marvell Technology and JB Hunt

0.74

Correlation Coefficient

Marvell Technology  JB Hunt

Poor diversification

The 3 months correlation between Marvell and J1BH34 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Marvell Technology and JB Hunt Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JB Hunt Transport and Marvell Technology 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 Marvell Technology are associated (or correlated) with JB Hunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JB Hunt Transport has no effect on the direction of Marvell Technology i.e., Marvell Technology and JB Hunt go up and down completely randomly.

Pair Corralation between Marvell Technology and JB Hunt

Assuming the 90 days trading horizon Marvell Technology is expected to generate 2.87 times more return on investment than JB Hunt. However, Marvell Technology is 2.87 times more volatile than JB Hunt Transport. It trades about 0.11 of its potential returns per unit of risk. JB Hunt Transport is currently generating about 0.01 per unit of risk. If you would invest  3,425  in Marvell Technology on October 24, 2024 and sell it today you would earn a total of  4,075  from holding Marvell Technology or generate 118.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Marvell Technology  vs.  JB Hunt Transport

Marvell Technology

Risk-Adjusted Performance

15 of 100

Good

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

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.

Pair Trading with Marvell Technology and JB Hunt

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

The idea behind Marvell Technology and JB Hunt Transport 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.