Correlation Between Power Metal and JB Hunt

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

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

Diversification Opportunities for Power Metal and JB Hunt

-0.56

Correlation Coefficient

Power Metal  JB Hunt

Excellent diversification

The 3 months correlation between Power and 0J71 is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Power Metal Resources 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 Power Metal 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 Power Metal Resources 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 Power Metal i.e., Power Metal and JB Hunt go up and down completely randomly.

Pair Corralation between Power Metal and JB Hunt

Assuming the 90 days trading horizon Power Metal is expected to generate 1.18 times less return on investment than JB Hunt. In addition to that, Power Metal is 2.17 times more volatile than JB Hunt Transport. It trades about 0.03 of its total potential returns per unit of risk. JB Hunt Transport is currently generating about 0.06 per unit of volatility. If you would invest  16,878  in JB Hunt Transport on September 18, 2024 and sell it today you would earn a total of  1,034  from holding JB Hunt Transport or generate 6.13% return on investment over 90 days.

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

Power Metal Resources  vs.  JB Hunt Transport

Power Metal Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Power Metal Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Power Metal 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

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JB Hunt Transport are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JB Hunt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Power Metal and JB Hunt

The main advantage of trading using opposite Power Metal and JB Hunt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Metal 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 Power Metal Resources 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.