Correlation Between American Balanced and CarMax
Can any of the company-specific risk be diversified away by investing in both American Balanced 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 American Balanced and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and CarMax Inc, you can compare the effects of market volatilities on American Balanced 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 American Balanced with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and CarMax.
Diversification Opportunities for American Balanced and CarMax
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and CarMax is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and American Balanced 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 American Balanced 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 American Balanced i.e., American Balanced and CarMax go up and down completely randomly.
Pair Corralation between American Balanced and CarMax
Assuming the 90 days horizon American Balanced is expected to generate 0.34 times more return on investment than CarMax. However, American Balanced is 2.95 times less risky than CarMax. It trades about 0.13 of its potential returns per unit of risk. CarMax Inc is currently generating about -0.22 per unit of risk. If you would invest 3,457 in American Balanced on October 23, 2024 and sell it today you would earn a total of 44.00 from holding American Balanced or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.89% |
| Values | Daily Returns |
American Balanced vs. CarMax Inc
Performance |
| Timeline |
| American Balanced |
| CarMax Inc |
American Balanced and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and CarMax
The main advantage of trading using opposite American Balanced and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced 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.| American Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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