Correlation Between JB Hunt and United Utilities

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

Diversification Opportunities for JB Hunt and United Utilities

0.51

Correlation Coefficient

JB Hunt  United Utilities

Very weak diversification

The 3 months correlation between 0J71 and United is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding JB Hunt Transport and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of JB Hunt i.e., JB Hunt and United Utilities go up and down completely randomly.

Pair Corralation between JB Hunt and United Utilities

Assuming the 90 days trading horizon JB Hunt is expected to generate 40.22 times less return on investment than United Utilities. In addition to that, JB Hunt is 1.24 times more volatile than United Utilities Group. It trades about 0.0 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.05 per unit of volatility. If you would invest  102,157  in United Utilities Group on September 21, 2024 and sell it today you would earn a total of  4,243  from holding United Utilities Group or generate 4.15% return on investment over 90 days.

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

JB Hunt Transport  vs.  United Utilities Group

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.

United Utilities

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with JB Hunt and United Utilities

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

The idea behind JB Hunt Transport and United Utilities Group 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.