Correlation Between CarMax and HealthCare
Can any of the company-specific risk be diversified away by investing in both CarMax and HealthCare 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 HealthCare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and HealthCare, you can compare the effects of market volatilities on CarMax and HealthCare 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 HealthCare. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and HealthCare.
Diversification Opportunities for CarMax and HealthCare
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CarMax and HealthCare is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and HealthCare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HealthCare 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 HealthCare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HealthCare has no effect on the direction of CarMax i.e., CarMax and HealthCare go up and down completely randomly.
Pair Corralation between CarMax and HealthCare
Considering the 90-day investment horizon CarMax Inc is expected to generate 2.21 times more return on investment than HealthCare. However, CarMax is 2.21 times more volatile than HealthCare. It trades about 0.2 of its potential returns per unit of risk. HealthCare is currently generating about -0.23 per unit of risk. If you would invest 8,176 in CarMax Inc on November 1, 2024 and sell it today you would earn a total of 659.00 from holding CarMax Inc or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
CarMax Inc vs. HealthCare
Performance |
| Timeline |
| CarMax Inc |
| HealthCare |
CarMax and HealthCare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and HealthCare
The main advantage of trading using opposite CarMax and HealthCare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, HealthCare 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 HealthCare will offset losses from the drop in HealthCare's long position.The idea behind CarMax Inc and HealthCare 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.| HealthCare vs. The Joint Corp | HealthCare vs. LENSAR Inc | HealthCare vs. Cardinal Health | HealthCare vs. Merit Medical Systems |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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