Correlation Between SPARTAN STORES and CarMax
Can any of the company-specific risk be diversified away by investing in both SPARTAN 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 SPARTAN STORES and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPARTAN STORES and CarMax Inc, you can compare the effects of market volatilities on SPARTAN 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 SPARTAN STORES with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPARTAN STORES and CarMax.
Diversification Opportunities for SPARTAN STORES and CarMax
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SPARTAN and CarMax is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding SPARTAN STORES and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and SPARTAN 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 SPARTAN 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 SPARTAN STORES i.e., SPARTAN STORES and CarMax go up and down completely randomly.
Pair Corralation between SPARTAN STORES and CarMax
Assuming the 90 days trading horizon SPARTAN STORES is expected to under-perform the CarMax. But the stock apears to be less risky and, when comparing its historical volatility, SPARTAN STORES is 1.24 times less risky than CarMax. The stock trades about -0.03 of its potential returns per unit of risk. The CarMax Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,200 in CarMax Inc on September 3, 2024 and sell it today you would earn a total of 1,888 from holding CarMax Inc or generate 30.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPARTAN STORES vs. CarMax Inc
Performance |
| Timeline |
| SPARTAN STORES |
| CarMax Inc |
SPARTAN STORES and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPARTAN STORES and CarMax
The main advantage of trading using opposite SPARTAN STORES and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPARTAN 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.| SPARTAN STORES vs. Playa Hotels Resorts | SPARTAN STORES vs. TYSON FOODS A | SPARTAN STORES vs. Host Hotels Resorts | SPARTAN STORES vs. Pebblebrook Hotel Trust |
| CarMax vs. COSTCO WHOLESALE CDR | CarMax vs. Ross Stores | CarMax vs. SPARTAN STORES | CarMax vs. GUARDANT HEALTH CL |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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