Correlation Between United Parcel and JB Hunt

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

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

Diversification Opportunities for United Parcel and JB Hunt

0.5

Correlation Coefficient

United Parcel  JB Hunt

Very weak diversification

The 3 months correlation between United and JBHT is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding United Parcel Service 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 United Parcel 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 United Parcel Service 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 United Parcel i.e., United Parcel and JB Hunt go up and down completely randomly.

Pair Corralation between United Parcel and JB Hunt

Considering the 90-day investment horizon United Parcel Service is expected to generate 1.26 times more return on investment than JB Hunt. However, United Parcel is 1.26 times more volatile than JB Hunt Transport. It trades about -0.07 of its potential returns per unit of risk. JB Hunt Transport is currently generating about -0.1 per unit of risk. If you would invest  12,355  in United Parcel Service on December 28, 2024 and sell it today you would lose (1,254) from holding United Parcel Service or give up 10.15% of portfolio value over 90 days.

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

United Parcel Service  vs.  JB Hunt Transport

United Parcel Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Parcel Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

JB Hunt Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days JB Hunt Transport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with United Parcel and JB Hunt

The main advantage of trading using opposite United Parcel and JB Hunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Parcel 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 United Parcel Service 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.