Correlation Between Waste Management and CarMax
Can any of the company-specific risk be diversified away by investing in both Waste Management 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 Waste Management and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and CarMax Inc, you can compare the effects of market volatilities on Waste Management 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 Waste Management with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and CarMax.
Diversification Opportunities for Waste Management and CarMax
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Waste and CarMax is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Waste Management 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 Waste Management 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 Waste Management i.e., Waste Management and CarMax go up and down completely randomly.
Pair Corralation between Waste Management and CarMax
Assuming the 90 days trading horizon Waste Management is expected to generate 0.72 times more return on investment than CarMax. However, Waste Management is 1.38 times less risky than CarMax. It trades about 0.27 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.15 per unit of risk. If you would invest 19,502 in Waste Management on November 3, 2024 and sell it today you would earn a total of 1,753 from holding Waste Management or generate 8.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Waste Management vs. CarMax Inc
Performance |
| Timeline |
| Waste Management |
| CarMax Inc |
Waste Management and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and CarMax
The main advantage of trading using opposite Waste Management and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management 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.| Waste Management vs. Focus Home Interactive | Waste Management vs. China Resources Beer | Waste Management vs. Monster Beverage Corp | Waste Management vs. Hisense Home Appliances |
| CarMax vs. GRIFFIN MINING LTD | CarMax vs. MCEWEN MINING INC | CarMax vs. Yanzhou Coal Mining | CarMax vs. De Grey Mining |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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