Correlation Between CarMax and Asbury Automotive
Can any of the company-specific risk be diversified away by investing in both CarMax and Asbury Automotive 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 Asbury Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Asbury Automotive Group, you can compare the effects of market volatilities on CarMax and Asbury Automotive 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 Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Asbury Automotive.
Diversification Opportunities for CarMax and Asbury Automotive
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CarMax and Asbury is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive 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 Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of CarMax i.e., CarMax and Asbury Automotive go up and down completely randomly.
Pair Corralation between CarMax and Asbury Automotive
Assuming the 90 days horizon CarMax Inc is expected to generate 0.9 times more return on investment than Asbury Automotive. However, CarMax Inc is 1.12 times less risky than Asbury Automotive. It trades about 0.08 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.03 per unit of risk. If you would invest 6,492 in CarMax Inc on October 13, 2024 and sell it today you would earn a total of 1,402 from holding CarMax Inc or generate 21.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.32% |
| Values | Daily Returns |
CarMax Inc vs. Asbury Automotive Group
Performance |
| Timeline |
| CarMax Inc |
| Asbury Automotive |
CarMax and Asbury Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and Asbury Automotive
The main advantage of trading using opposite CarMax and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Asbury Automotive 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 Asbury Automotive will offset losses from the drop in Asbury Automotive's long position.| CarMax vs. Take Two Interactive Software | CarMax vs. Alfa Financial Software | CarMax vs. FANDIFI TECHNOLOGY P | CarMax vs. Methode Electronics |
| Asbury Automotive vs. STEEL DYNAMICS | Asbury Automotive vs. ALGOMA STEEL GROUP | Asbury Automotive vs. United States Steel | Asbury Automotive vs. PT Steel Pipe |
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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