Correlation Between JB Hunt and Host Hotels

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

Diversification Opportunities for JB Hunt and Host Hotels

0.37

Correlation Coefficient

JB Hunt  Host Hotels

Weak diversification

The 3 months correlation between 0J71 and Host is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding JB Hunt Transport and Host Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Host Hotels Resorts 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 Host Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Host Hotels Resorts has no effect on the direction of JB Hunt i.e., JB Hunt and Host Hotels go up and down completely randomly.

Pair Corralation between JB Hunt and Host Hotels

Assuming the 90 days trading horizon JB Hunt Transport is expected to under-perform the Host Hotels. But the stock apears to be less risky and, when comparing its historical volatility, JB Hunt Transport is 1.2 times less risky than Host Hotels. The stock trades about -0.39 of its potential returns per unit of risk. The Host Hotels Resorts is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,851  in Host Hotels Resorts on September 28, 2024 and sell it today you would lose (25.00) from holding Host Hotels Resorts or give up 1.35% of portfolio value over 90 days.

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

JB Hunt Transport  vs.  Host Hotels Resorts

JB Hunt Transport

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, JB Hunt is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Host Hotels Resorts

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Host Hotels is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JB Hunt and Host Hotels

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

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