Correlation Between CBIZ and CarMax
Can any of the company-specific risk be diversified away by investing in both CBIZ 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 CBIZ and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CBIZ Inc and CarMax Inc, you can compare the effects of market volatilities on CBIZ 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 CBIZ with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of CBIZ and CarMax.
Diversification Opportunities for CBIZ and CarMax
Very weak diversification
The 3 months correlation between CBIZ and CarMax is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding CBIZ Inc and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and CBIZ 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 CBIZ 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 CBIZ i.e., CBIZ and CarMax go up and down completely randomly.
Pair Corralation between CBIZ and CarMax
Considering the 90-day investment horizon CBIZ is expected to generate 1.71 times less return on investment than CarMax. In addition to that, CBIZ is 1.21 times more volatile than CarMax Inc. It trades about 0.04 of its total potential returns per unit of risk. CarMax Inc is currently generating about 0.09 per unit of volatility. If you would invest 6,965 in CarMax Inc on August 28, 2024 and sell it today you would earn a total of 1,550 from holding CarMax Inc or generate 22.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CBIZ Inc vs. CarMax Inc
Performance |
| Timeline |
| CBIZ Inc |
| CarMax Inc |
CBIZ and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CBIZ and CarMax
The main advantage of trading using opposite CBIZ and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CBIZ 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.The idea behind CBIZ Inc and CarMax Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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