Correlation Between Aston Martin and CarMax

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

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

Diversification Opportunities for Aston Martin and CarMax

-0.57

Correlation Coefficient

Aston Martin  CarMax

Excellent diversification

The 3 months correlation between Aston and CarMax is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Aston Martin Lagonda and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Aston Martin 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 Aston Martin Lagonda 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 Aston Martin i.e., Aston Martin and CarMax go up and down completely randomly.

Pair Corralation between Aston Martin and CarMax

Assuming the 90 days horizon Aston Martin Lagonda is expected to under-perform the CarMax. In addition to that, Aston Martin is 1.61 times more volatile than CarMax Inc. It trades about -0.12 of its total potential returns per unit of risk. CarMax Inc is currently generating about 0.09 per unit of volatility. If you would invest  7,554  in CarMax Inc on October 9, 2024 and sell it today you would earn a total of  421.00  from holding CarMax Inc or generate 5.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aston Martin Lagonda  vs.  CarMax Inc

Aston Martin Lagonda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aston Martin Lagonda has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CarMax Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, CarMax showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aston Martin and CarMax

The main advantage of trading using opposite Aston Martin and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aston Martin 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 Aston Martin Lagonda 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.