Correlation Between Premier Foods and JB Hunt

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

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

Diversification Opportunities for Premier Foods and JB Hunt

0.65

Correlation Coefficient

Premier Foods  JB Hunt

Poor diversification

The 3 months correlation between Premier and 0J71 is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC 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 Premier Foods 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 Premier Foods PLC 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 Premier Foods i.e., Premier Foods and JB Hunt go up and down completely randomly.

Pair Corralation between Premier Foods and JB Hunt

Assuming the 90 days trading horizon Premier Foods is expected to generate 2.19 times less return on investment than JB Hunt. But when comparing it to its historical volatility, Premier Foods PLC is 1.37 times less risky than JB Hunt. It trades about 0.05 of its potential returns per unit of risk. JB Hunt Transport is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  16,827  in JB Hunt Transport on September 12, 2024 and sell it today you would earn a total of  1,463  from holding JB Hunt Transport or generate 8.69% return on investment over 90 days.

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

Premier Foods PLC  vs.  JB Hunt Transport

Premier Foods PLC

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Premier Foods is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

JB Hunt Transport

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hunt Transport are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, JB Hunt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Premier Foods and JB Hunt

The main advantage of trading using opposite Premier Foods and JB Hunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods 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 Premier Foods PLC 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.