Correlation Between CarMax and Zhongsheng Group
Can any of the company-specific risk be diversified away by investing in both CarMax and Zhongsheng Group 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 Zhongsheng Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Zhongsheng Group Holdings, you can compare the effects of market volatilities on CarMax and Zhongsheng Group 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 Zhongsheng Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Zhongsheng Group.
Diversification Opportunities for CarMax and Zhongsheng Group
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CarMax and Zhongsheng is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Zhongsheng Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongsheng Group Holdings 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 Zhongsheng Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongsheng Group Holdings has no effect on the direction of CarMax i.e., CarMax and Zhongsheng Group go up and down completely randomly.
Pair Corralation between CarMax and Zhongsheng Group
Considering the 90-day investment horizon CarMax Inc is expected to generate 0.31 times more return on investment than Zhongsheng Group. However, CarMax Inc is 3.2 times less risky than Zhongsheng Group. It trades about -0.2 of its potential returns per unit of risk. Zhongsheng Group Holdings is currently generating about -0.18 per unit of risk. If you would invest 8,423 in CarMax Inc on October 20, 2024 and sell it today you would lose (529.00) from holding CarMax Inc or give up 6.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
CarMax Inc vs. Zhongsheng Group Holdings
Performance |
| Timeline |
| CarMax Inc |
| Zhongsheng Group Holdings |
CarMax and Zhongsheng Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and Zhongsheng Group
The main advantage of trading using opposite CarMax and Zhongsheng Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Zhongsheng Group 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 Zhongsheng Group will offset losses from the drop in Zhongsheng Group's long position.The idea behind CarMax Inc and Zhongsheng Group Holdings 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.| Zhongsheng Group vs. CarMax Inc | Zhongsheng Group vs. SunCar Technology Group | Zhongsheng Group vs. U Power Limited | Zhongsheng Group vs. Camping World Holdings |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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