Correlation Between Aeorema Communications and CarMax
Can any of the company-specific risk be diversified away by investing in both Aeorema 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 Aeorema Communications and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeorema Communications Plc and CarMax Inc, you can compare the effects of market volatilities on Aeorema 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 Aeorema Communications with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and CarMax.
Diversification Opportunities for Aeorema Communications and CarMax
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Aeorema and CarMax is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema 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 Aeorema 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 Aeorema 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 Aeorema Communications i.e., Aeorema Communications and CarMax go up and down completely randomly.
Pair Corralation between Aeorema Communications and CarMax
Assuming the 90 days trading horizon Aeorema Communications is expected to generate 1.45 times less return on investment than CarMax. But when comparing it to its historical volatility, Aeorema Communications Plc is 1.94 times less risky than CarMax. It trades about 0.35 of its potential returns per unit of risk. 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeorema Communications Plc vs. CarMax Inc
Performance |
| Timeline |
| Aeorema Communications |
| CarMax Inc |
Aeorema Communications and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and CarMax
The main advantage of trading using opposite Aeorema Communications and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema 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.| Aeorema Communications vs. Ameriprise Financial | Aeorema Communications vs. Universal Health Services | Aeorema Communications vs. Sabre Insurance Group | Aeorema Communications vs. Primary Health Properties |
| CarMax vs. Park Hotels Resorts | CarMax vs. PPHE Hotel Group | CarMax vs. Scandic Hotels Group | CarMax vs. Coeur Mining |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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