Correlation Between Gamma Communications and CarMax
Can any of the company-specific risk be diversified away by investing in both Gamma 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 Gamma Communications and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gamma Communications plc and CarMax Inc, you can compare the effects of market volatilities on Gamma 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 Gamma Communications with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and CarMax.
Diversification Opportunities for Gamma Communications and CarMax
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gamma and CarMax is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Gamma Communications plc and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Gamma 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 Gamma Communications plc 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 Gamma Communications i.e., Gamma Communications and CarMax go up and down completely randomly.
Pair Corralation between Gamma Communications and CarMax
Assuming the 90 days horizon Gamma Communications is expected to generate 4.52 times less return on investment than CarMax. But when comparing it to its historical volatility, Gamma Communications plc is 1.44 times less risky than CarMax. It trades about 0.1 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 7,002 in CarMax Inc on September 12, 2024 and sell it today you would earn a total of 1,096 from holding CarMax Inc or generate 15.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gamma Communications plc vs. CarMax Inc
Performance |
| Timeline |
| Gamma Communications plc |
| CarMax Inc |
Gamma Communications and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and CarMax
The main advantage of trading using opposite Gamma Communications and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma 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.| Gamma Communications vs. Superior Plus Corp | Gamma Communications vs. SIVERS SEMICONDUCTORS AB | Gamma Communications vs. Norsk Hydro ASA | Gamma Communications vs. Reliance Steel Aluminum |
| CarMax vs. Superior Plus Corp | CarMax vs. SIVERS SEMICONDUCTORS AB | CarMax vs. Norsk Hydro ASA | CarMax vs. Reliance Steel Aluminum |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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