Correlation Between CarMax and Aeorema Communications
Can any of the company-specific risk be diversified away by investing in both CarMax and Aeorema Communications 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 CarMax and Aeorema Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Aeorema Communications Plc, you can compare the effects of market volatilities on CarMax and Aeorema Communications 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 CarMax with a short position of Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Aeorema Communications.
Diversification Opportunities for CarMax and Aeorema Communications
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CarMax and Aeorema is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications and CarMax 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 CarMax Inc are associated (or correlated) with Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of CarMax i.e., CarMax and Aeorema Communications go up and down completely randomly.
Pair Corralation between CarMax and Aeorema Communications
Assuming the 90 days trading horizon CarMax Inc is expected to generate 1.94 times more return on investment than Aeorema Communications. However, CarMax is 1.94 times more volatile than Aeorema Communications Plc. It trades about 0.27 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about 0.35 per unit of risk. If you would invest 7,655 in CarMax Inc on September 12, 2024 and sell it today you would earn a total of 1,074 from holding CarMax Inc or generate 14.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarMax Inc vs. Aeorema Communications Plc
Performance |
| Timeline |
| CarMax Inc |
| Aeorema Communications |
CarMax and Aeorema Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and Aeorema Communications
The main advantage of trading using opposite CarMax and Aeorema Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Aeorema Communications 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 Aeorema Communications will offset losses from the drop in Aeorema Communications' long position.| CarMax vs. Park Hotels Resorts | CarMax vs. PPHE Hotel Group | CarMax vs. Scandic Hotels Group | CarMax vs. Coeur Mining |
| Aeorema Communications vs. Ameriprise Financial | Aeorema Communications vs. Universal Health Services | Aeorema Communications vs. Sabre Insurance Group | Aeorema Communications vs. Primary Health Properties |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |