Correlation Between CarMax and Installed Building
Can any of the company-specific risk be diversified away by investing in both CarMax and Installed Building 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 Installed Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Installed Building Products, you can compare the effects of market volatilities on CarMax and Installed Building 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 Installed Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Installed Building.
Diversification Opportunities for CarMax and Installed Building
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CarMax and Installed is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Installed Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Installed Building 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 Installed Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Installed Building has no effect on the direction of CarMax i.e., CarMax and Installed Building go up and down completely randomly.
Pair Corralation between CarMax and Installed Building
Considering the 90-day investment horizon CarMax Inc is expected to generate 0.58 times more return on investment than Installed Building. However, CarMax Inc is 1.74 times less risky than Installed Building. It trades about 0.33 of its potential returns per unit of risk. Installed Building Products is currently generating about 0.02 per unit of risk. If you would invest 7,431 in CarMax Inc on August 28, 2024 and sell it today you would earn a total of 1,084 from holding CarMax Inc or generate 14.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarMax Inc vs. Installed Building Products
Performance |
| Timeline |
| CarMax Inc |
| Installed Building |
CarMax and Installed Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and Installed Building
The main advantage of trading using opposite CarMax and Installed Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Installed Building 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 Installed Building will offset losses from the drop in Installed Building's long position.| CarMax vs. Kingsway Financial Services | CarMax vs. KAR Auction Services | CarMax vs. Cango Inc | CarMax vs. Vroom Inc |
| Installed Building vs. Century Communities | Installed Building vs. MI Homes | Installed Building vs. Taylor Morn Home | Installed Building vs. TRI Pointe Homes |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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