Correlation Between Apple and CarMax
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and CarMax Inc, you can compare the effects of market volatilities on Apple 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 Apple with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and CarMax.
Diversification Opportunities for Apple and CarMax
Very poor diversification
The 3 months correlation between Apple and CarMax is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Apple 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 Apple Inc 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 Apple i.e., Apple and CarMax go up and down completely randomly.
Pair Corralation between Apple and CarMax
Assuming the 90 days trading horizon Apple Inc is expected to generate 0.62 times more return on investment than CarMax. However, Apple Inc is 1.6 times less risky than CarMax. It trades about 0.08 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.03 per unit of risk. If you would invest 13,022 in Apple Inc on October 23, 2024 and sell it today you would earn a total of 9,288 from holding Apple Inc or generate 71.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. CarMax Inc
Performance |
| Timeline |
| Apple Inc |
| CarMax Inc |
Apple and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and CarMax
The main advantage of trading using opposite Apple and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. T MOBILE US | Apple vs. Highlight Communications AG | Apple vs. Forsys Metals Corp | Apple vs. GEELY AUTOMOBILE |
| CarMax vs. Gladstone Investment | CarMax vs. Waste Management | CarMax vs. Cleanaway Waste Management | CarMax vs. Apollo Investment Corp |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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