Correlation Between AZZ Incorporated and CarMax

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

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

Diversification Opportunities for AZZ Incorporated and CarMax

0.42

Correlation Coefficient

AZZ Incorporated  CarMax

Very weak diversification

The 3 months correlation between AZZ and CarMax is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding AZZ Incorporated and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and AZZ Incorporated 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 AZZ Incorporated 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 AZZ Incorporated i.e., AZZ Incorporated and CarMax go up and down completely randomly.

Pair Corralation between AZZ Incorporated and CarMax

Considering the 90-day investment horizon AZZ Incorporated is expected to generate 1.06 times more return on investment than CarMax. However, AZZ Incorporated is 1.06 times more volatile than CarMax Inc. It trades about 0.06 of its potential returns per unit of risk. CarMax Inc is currently generating about -0.09 per unit of risk. If you would invest  8,190  in AZZ Incorporated on December 27, 2024 and sell it today you would earn a total of  456.00  from holding AZZ Incorporated or generate 5.57% return on investment over 90 days.

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

AZZ Incorporated  vs.  CarMax Inc

AZZ Incorporated

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AZZ Incorporated may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 AZZ Incorporated and CarMax

The main advantage of trading using opposite AZZ Incorporated and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AZZ Incorporated 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 AZZ Incorporated 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.