Correlation Between CarMax and Eclectic Bar
Can any of the company-specific risk be diversified away by investing in both CarMax and Eclectic Bar 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 Eclectic Bar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Eclectic Bar Group, you can compare the effects of market volatilities on CarMax and Eclectic Bar 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 Eclectic Bar. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Eclectic Bar.
Diversification Opportunities for CarMax and Eclectic Bar
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CarMax and Eclectic is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Eclectic Bar Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eclectic Bar Group 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 Eclectic Bar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eclectic Bar Group has no effect on the direction of CarMax i.e., CarMax and Eclectic Bar go up and down completely randomly.
Pair Corralation between CarMax and Eclectic Bar
Assuming the 90 days trading horizon CarMax is expected to generate 2.21 times less return on investment than Eclectic Bar. But when comparing it to its historical volatility, CarMax Inc is 2.0 times less risky than Eclectic Bar. It trades about 0.04 of its potential returns per unit of risk. Eclectic Bar Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,600 in Eclectic Bar Group on September 24, 2024 and sell it today you would earn a total of 2,100 from holding Eclectic Bar Group or generate 80.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
CarMax Inc vs. Eclectic Bar Group
Performance |
| Timeline |
| CarMax Inc |
| Eclectic Bar Group |
CarMax and Eclectic Bar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and Eclectic Bar
The main advantage of trading using opposite CarMax and Eclectic Bar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Eclectic Bar 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 Eclectic Bar will offset losses from the drop in Eclectic Bar's long position.| CarMax vs. Uniper SE | CarMax vs. Mulberry Group PLC | CarMax vs. London Security Plc | CarMax vs. Triad Group PLC |
| Eclectic Bar vs. Toyota Motor Corp | Eclectic Bar vs. SoftBank Group Corp | Eclectic Bar vs. OTP Bank Nyrt | Eclectic Bar vs. Newmont Corp |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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