Correlation Between INTER CARS and CarMax
Can any of the company-specific risk be diversified away by investing in both INTER CARS 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 INTER CARS and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INTER CARS SA and CarMax Inc, you can compare the effects of market volatilities on INTER CARS 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 INTER CARS with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTER CARS and CarMax.
Diversification Opportunities for INTER CARS and CarMax
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between INTER and CarMax is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and INTER CARS 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 INTER CARS SA 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 INTER CARS i.e., INTER CARS and CarMax go up and down completely randomly.
Pair Corralation between INTER CARS and CarMax
Assuming the 90 days horizon INTER CARS is expected to generate 1.44 times less return on investment than CarMax. But when comparing it to its historical volatility, INTER CARS SA is 1.1 times less risky than CarMax. It trades about 0.03 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,200 in CarMax Inc on September 3, 2024 and sell it today you would earn a total of 1,888 from holding CarMax Inc or generate 30.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
INTER CARS SA vs. CarMax Inc
Performance |
| Timeline |
| INTER CARS SA |
| CarMax Inc |
INTER CARS and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INTER CARS and CarMax
The main advantage of trading using opposite INTER CARS and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTER CARS 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.| INTER CARS vs. MOVIE GAMES SA | INTER CARS vs. FRACTAL GAMING GROUP | INTER CARS vs. Constellation Software | INTER CARS vs. Alfa Financial Software |
| CarMax vs. COSTCO WHOLESALE CDR | CarMax vs. Ross Stores | CarMax vs. SPARTAN STORES | CarMax vs. GUARDANT HEALTH CL |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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