Correlation Between JB Hunt and DFS Furniture

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

Diversification Opportunities for JB Hunt and DFS Furniture

0.32

Correlation Coefficient

JB Hunt  DFS Furniture

Weak diversification

The 3 months correlation between 0J71 and DFS is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding JB Hunt Transport and DFS Furniture PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DFS Furniture 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 DFS Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DFS Furniture PLC has no effect on the direction of JB Hunt i.e., JB Hunt and DFS Furniture go up and down completely randomly.

Pair Corralation between JB Hunt and DFS Furniture

Assuming the 90 days trading horizon JB Hunt Transport is expected to under-perform the DFS Furniture. But the stock apears to be less risky and, when comparing its historical volatility, JB Hunt Transport is 1.21 times less risky than DFS Furniture. The stock trades about -0.02 of its potential returns per unit of risk. The DFS Furniture PLC is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  11,500  in DFS Furniture PLC on September 24, 2024 and sell it today you would earn a total of  2,640  from holding DFS Furniture PLC or generate 22.96% return on investment over 90 days.

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

JB Hunt Transport  vs.  DFS Furniture PLC

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.

DFS Furniture PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DFS Furniture PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, DFS Furniture exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JB Hunt and DFS Furniture

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

The idea behind JB Hunt Transport and DFS Furniture 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.