Correlation Between Algorand and CarMax

Can any of the company-specific risk be diversified away by investing in both Algorand 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 Algorand and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Algorand and CarMax Inc, you can compare the effects of market volatilities on Algorand 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 Algorand with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and CarMax.

Diversification Opportunities for Algorand and CarMax

0.47

Correlation Coefficient

Algorand  CarMax

Very weak diversification

The 3 months correlation between Algorand and CarMax is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Algorand 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 Algorand 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 Algorand i.e., Algorand and CarMax go up and down completely randomly.

Pair Corralation between Algorand and CarMax

Assuming the 90 days trading horizon Algorand is expected to under-perform the CarMax. In addition to that, Algorand is 3.34 times more volatile than CarMax Inc. It trades about -0.15 of its total potential returns per unit of risk. CarMax Inc is currently generating about -0.17 per unit of volatility. If you would invest  8,046  in CarMax Inc on December 23, 2024 and sell it today you would lose (1,452) from holding CarMax Inc or give up 18.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.85%
Values	Daily Returns

Algorand  vs.  CarMax Inc

Algorand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Algorand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Algorand shareholders.

CarMax Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days CarMax Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Algorand and CarMax

The main advantage of trading using opposite Algorand and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algorand 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.

The idea behind Algorand and CarMax Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.