Correlation Between CarMax and Spring Valley
Can any of the company-specific risk be diversified away by investing in both CarMax and Spring Valley 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 Spring Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Spring Valley Acquisition, you can compare the effects of market volatilities on CarMax and Spring Valley 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 Spring Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Spring Valley.
Diversification Opportunities for CarMax and Spring Valley
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CarMax and Spring is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Spring Valley Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spring Valley Acquisition 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 Spring Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spring Valley Acquisition has no effect on the direction of CarMax i.e., CarMax and Spring Valley go up and down completely randomly.
Pair Corralation between CarMax and Spring Valley
Considering the 90-day investment horizon CarMax Inc is expected to generate 10.3 times more return on investment than Spring Valley. However, CarMax is 10.3 times more volatile than Spring Valley Acquisition. It trades about 0.04 of its potential returns per unit of risk. Spring Valley Acquisition is currently generating about 0.09 per unit of risk. If you would invest 6,016 in CarMax Inc on September 13, 2024 and sell it today you would earn a total of 2,662 from holding CarMax Inc or generate 44.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarMax Inc vs. Spring Valley Acquisition
Performance |
| Timeline |
| CarMax Inc |
| Spring Valley Acquisition |
CarMax and Spring Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and Spring Valley
The main advantage of trading using opposite CarMax and Spring Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Spring Valley 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 Spring Valley will offset losses from the drop in Spring Valley's long position.The idea behind CarMax Inc and Spring Valley Acquisition 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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