Correlation Between CarMax and Clean Air
Can any of the company-specific risk be diversified away by investing in both CarMax and Clean Air 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 CarMax and Clean Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Clean Air Metals, you can compare the effects of market volatilities on CarMax and Clean Air 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 CarMax with a short position of Clean Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Clean Air.
Diversification Opportunities for CarMax and Clean Air
Pay attention - limited upside
The 3 months correlation between CarMax and Clean is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Clean Air Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Air Metals and CarMax 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 CarMax Inc are associated (or correlated) with Clean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Air Metals has no effect on the direction of CarMax i.e., CarMax and Clean Air go up and down completely randomly.
Pair Corralation between CarMax and Clean Air
Considering the 90-day investment horizon CarMax is expected to generate 1.74 times less return on investment than Clean Air. But when comparing it to its historical volatility, CarMax Inc is 3.29 times less risky than Clean Air. It trades about 0.03 of its potential returns per unit of risk. Clean Air Metals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 10.00 in Clean Air Metals on August 28, 2024 and sell it today you would lose (5.90) from holding Clean Air Metals or give up 59.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
CarMax Inc vs. Clean Air Metals
Performance |
| Timeline |
| CarMax Inc |
| Clean Air Metals |
CarMax and Clean Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and Clean Air
The main advantage of trading using opposite CarMax and Clean Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Clean Air 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 Clean Air will offset losses from the drop in Clean Air's long position.The idea behind CarMax Inc and Clean Air Metals 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.| Clean Air vs. Morningstar Unconstrained Allocation | Clean Air vs. High Yield Municipal Fund | Clean Air vs. Knife River | Clean Air vs. Klckner Co SE |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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