Correlation Between KAR Auction and CarMax
Can any of the company-specific risk be diversified away by investing in both KAR Auction 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 KAR Auction and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KAR Auction Services and CarMax Inc, you can compare the effects of market volatilities on KAR Auction 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 KAR Auction with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of KAR Auction and CarMax.
Diversification Opportunities for KAR Auction and CarMax
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KAR and CarMax is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding KAR Auction Services and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and KAR Auction 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 KAR Auction Services 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 KAR Auction i.e., KAR Auction and CarMax go up and down completely randomly.
Pair Corralation between KAR Auction and CarMax
Considering the 90-day investment horizon KAR Auction Services is expected to generate 1.57 times more return on investment than CarMax. However, KAR Auction is 1.57 times more volatile than CarMax Inc. It trades about 0.32 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.32 per unit of risk. If you would invest 1,633 in KAR Auction Services on August 30, 2024 and sell it today you would earn a total of 378.00 from holding KAR Auction Services or generate 23.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KAR Auction Services vs. CarMax Inc
Performance |
| Timeline |
| KAR Auction Services |
| CarMax Inc |
KAR Auction and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KAR Auction and CarMax
The main advantage of trading using opposite KAR Auction and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KAR Auction 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.| KAR Auction vs. CarGurus | KAR Auction vs. Kingsway Financial Services | KAR Auction vs. Driven Brands Holdings | KAR Auction vs. Group 1 Automotive |
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.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |