Correlation Between DevEx Resources and CarMax

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

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

Diversification Opportunities for DevEx Resources and CarMax

-0.76

Correlation Coefficient

DevEx Resources  CarMax

Pay attention - limited upside

The 3 months correlation between DevEx and CarMax is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding DevEx Resources Limited and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and DevEx Resources 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 DevEx Resources Limited 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 DevEx Resources i.e., DevEx Resources and CarMax go up and down completely randomly.

Pair Corralation between DevEx Resources and CarMax

Assuming the 90 days horizon DevEx Resources Limited is expected to generate 10.16 times more return on investment than CarMax. However, DevEx Resources is 10.16 times more volatile than CarMax Inc. It trades about 0.07 of its potential returns per unit of risk. CarMax Inc is currently generating about -0.28 per unit of risk. If you would invest  5.50  in DevEx Resources Limited on October 9, 2024 and sell it today you would earn a total of  0.15  from holding DevEx Resources Limited or generate 2.73% return on investment over 90 days.

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

DevEx Resources Limited  vs.  CarMax Inc

DevEx Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DevEx Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CarMax Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CarMax unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DevEx Resources and CarMax

The main advantage of trading using opposite DevEx Resources and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DevEx Resources 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 DevEx Resources Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.