Correlation Between Charter Communications and CarMax
Can any of the company-specific risk be diversified away by investing in both Charter Communications and CarMax 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 Charter Communications and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charter Communications Cl and CarMax Inc, you can compare the effects of market volatilities on Charter Communications and CarMax 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 Charter Communications with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charter Communications and CarMax.
Diversification Opportunities for Charter Communications and CarMax
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Charter and CarMax is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Charter Communications Cl and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Charter Communications 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 Charter Communications Cl are associated (or correlated) with CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of Charter Communications i.e., Charter Communications and CarMax go up and down completely randomly.
Pair Corralation between Charter Communications and CarMax
Assuming the 90 days trading horizon Charter Communications Cl is expected to under-perform the CarMax. But the stock apears to be less risky and, when comparing its historical volatility, Charter Communications Cl is 1.02 times less risky than CarMax. The stock trades about -0.09 of its potential returns per unit of risk. The CarMax Inc is currently generating about 0.27 of returns per unit of risk over similar time horizon. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charter Communications Cl vs. CarMax Inc
Performance |
| Timeline |
| Charter Communications |
| CarMax Inc |
Charter Communications and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charter Communications and CarMax
The main advantage of trading using opposite Charter Communications and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charter Communications position performs unexpectedly, CarMax 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 CarMax will offset losses from the drop in CarMax's long position.| Charter Communications vs. Hong Kong Land | Charter Communications vs. Neometals | Charter Communications vs. Coor Service Management | Charter Communications vs. Fidelity Sustainable USD |
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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.
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