Correlation Between ProShares and CarMax
Can any of the company-specific risk be diversified away by investing in both ProShares 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 ProShares and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares SP 500 and CarMax Inc, you can compare the effects of market volatilities on ProShares 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 ProShares with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares and CarMax.
Diversification Opportunities for ProShares and CarMax
Very good diversification
The 3 months correlation between ProShares and CarMax is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ProShares SP 500 and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and ProShares 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 ProShares SP 500 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 ProShares i.e., ProShares and CarMax go up and down completely randomly.
Pair Corralation between ProShares and CarMax
Given the investment horizon of 90 days ProShares is expected to generate 4.9 times less return on investment than CarMax. But when comparing it to its historical volatility, ProShares SP 500 is 2.31 times less risky than CarMax. It trades about 0.16 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.33 of returns per unit of risk over similar time horizon. 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ProShares SP 500 vs. CarMax Inc
Performance |
| Timeline |
| ProShares SP 500 |
| CarMax Inc |
ProShares and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ProShares and CarMax
The main advantage of trading using opposite ProShares and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares 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.| ProShares vs. Morningstar Unconstrained Allocation | ProShares vs. High Yield Municipal Fund | ProShares vs. Via Renewables | ProShares vs. Knife River |
| CarMax vs. Kingsway Financial Services | CarMax vs. KAR Auction Services | CarMax vs. Cango Inc | CarMax vs. Vroom Inc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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