Correlation Between Ross Stores and CarMax
Can any of the company-specific risk be diversified away by investing in both Ross Stores and CarMax 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 Ross Stores and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and CarMax Inc, you can compare the effects of market volatilities on Ross Stores and CarMax 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 Ross Stores with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and CarMax.
Diversification Opportunities for Ross Stores and CarMax
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ross and CarMax is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Ross Stores 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 Ross Stores are associated (or correlated) with CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of Ross Stores i.e., Ross Stores and CarMax go up and down completely randomly.
Pair Corralation between Ross Stores and CarMax
Given the investment horizon of 90 days Ross Stores is expected to generate 1.13 times less return on investment than CarMax. But when comparing it to its historical volatility, Ross Stores is 1.25 times less risky than CarMax. It trades about 0.3 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 7,803 in CarMax Inc on September 16, 2024 and sell it today you would earn a total of 823.00 from holding CarMax Inc or generate 10.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ross Stores vs. CarMax Inc
Performance |
| Timeline |
| Ross Stores |
| CarMax Inc |
Ross Stores and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and CarMax
The main advantage of trading using opposite Ross Stores and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, CarMax 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 CarMax will offset losses from the drop in CarMax's long position.| Ross Stores vs. Capri Holdings | Ross Stores vs. Movado Group | Ross Stores vs. Tapestry | Ross Stores vs. Brilliant Earth Group |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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