Correlation Between CarMax and Gladstone Investment
Can any of the company-specific risk be diversified away by investing in both CarMax and Gladstone Investment 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 Gladstone Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Gladstone Investment, you can compare the effects of market volatilities on CarMax and Gladstone Investment 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 Gladstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Gladstone Investment.
Diversification Opportunities for CarMax and Gladstone Investment
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CarMax and Gladstone is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment 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 Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of CarMax i.e., CarMax and Gladstone Investment go up and down completely randomly.
Pair Corralation between CarMax and Gladstone Investment
Assuming the 90 days horizon CarMax Inc is expected to generate 1.23 times more return on investment than Gladstone Investment. However, CarMax is 1.23 times more volatile than Gladstone Investment. It trades about 0.06 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.04 per unit of risk. If you would invest 6,650 in CarMax Inc on November 3, 2024 and sell it today you would earn a total of 1,740 from holding CarMax Inc or generate 26.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarMax Inc vs. Gladstone Investment
Performance |
| Timeline |
| CarMax Inc |
| Gladstone Investment |
CarMax and Gladstone Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and Gladstone Investment
The main advantage of trading using opposite CarMax and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Gladstone Investment 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 Gladstone Investment will offset losses from the drop in Gladstone Investment's long position.| CarMax vs. GRIFFIN MINING LTD | CarMax vs. MCEWEN MINING INC | CarMax vs. Yanzhou Coal Mining | CarMax vs. De Grey Mining |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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