Correlation Between CarMax and USS
Can any of the company-specific risk be diversified away by investing in both CarMax and USS 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 USS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and USS Co, you can compare the effects of market volatilities on CarMax and USS 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 USS. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and USS.
Diversification Opportunities for CarMax and USS
Very weak diversification
The 3 months correlation between CarMax and USS is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and USS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USS Co 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 USS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USS Co has no effect on the direction of CarMax i.e., CarMax and USS go up and down completely randomly.
Pair Corralation between CarMax and USS
Assuming the 90 days horizon CarMax Inc is expected to generate 1.68 times more return on investment than USS. However, CarMax is 1.68 times more volatile than USS Co. It trades about 0.03 of its potential returns per unit of risk. USS Co is currently generating about 0.03 per unit of risk. If you would invest 6,203 in CarMax Inc on September 2, 2024 and sell it today you would earn a total of 1,885 from holding CarMax Inc or generate 30.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarMax Inc vs. USS Co
Performance |
| Timeline |
| CarMax Inc |
| USS Co |
CarMax and USS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CarMax and USS
The main advantage of trading using opposite CarMax and USS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, USS 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 USS will offset losses from the drop in USS's long position.| CarMax vs. Commercial Vehicle Group | CarMax vs. INTER CARS SA | CarMax vs. Cars Inc | CarMax vs. KINGBOARD CHEMICAL |
| USS vs. Superior Plus Corp | USS vs. NMI Holdings | USS vs. Origin Agritech | USS vs. SIVERS SEMICONDUCTORS AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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