Correlation Between Aramark Holdings and CarMax

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

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

Diversification Opportunities for Aramark Holdings and CarMax

0.73

Correlation Coefficient

Aramark Holdings  CarMax

Poor diversification

The 3 months correlation between Aramark and CarMax is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aramark Holdings and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Aramark Holdings 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 Aramark Holdings 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 Aramark Holdings i.e., Aramark Holdings and CarMax go up and down completely randomly.

Pair Corralation between Aramark Holdings and CarMax

Given the investment horizon of 90 days Aramark Holdings is expected to under-perform the CarMax. But the stock apears to be less risky and, when comparing its historical volatility, Aramark Holdings is 1.23 times less risky than CarMax. The stock trades about -0.08 of its potential returns per unit of risk. The CarMax Inc is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  8,206  in CarMax Inc on December 29, 2024 and sell it today you would lose (607.00) from holding CarMax Inc or give up 7.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Aramark Holdings  vs.  CarMax Inc

Aramark Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aramark Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Aramark Holdings and CarMax

The main advantage of trading using opposite Aramark Holdings and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aramark Holdings 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 Aramark Holdings 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.