Correlation Between CarMax and Dow Jones
Can any of the company-specific risk be diversified away by investing in both CarMax and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Dow Jones Industrial, you can compare the effects of market volatilities on CarMax and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Dow Jones.
Diversification Opportunities for CarMax and Dow Jones
Weak diversification
The 3 months correlation between CarMax and Dow is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of CarMax i.e., CarMax and Dow Jones go up and down completely randomly.
Pair Corralation between CarMax and Dow Jones
Assuming the 90 days horizon CarMax Inc is expected to generate 3.37 times more return on investment than Dow Jones. However, CarMax is 3.37 times more volatile than Dow Jones Industrial. It trades about 0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. 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 Together |
| Strength | Very Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
CarMax Inc vs. Dow Jones Industrial
Performance |
| Timeline |
CarMax and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
CarMax Inc
Pair trading matchups for CarMax
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with CarMax and Dow Jones
The main advantage of trading using opposite CarMax and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| CarMax vs. COSTCO WHOLESALE CDR | CarMax vs. Ross Stores | CarMax vs. SPARTAN STORES | CarMax vs. GUARDANT HEALTH CL |
| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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