Correlation Between Chesapeake Granite and CarMax

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

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

Diversification Opportunities for Chesapeake Granite and CarMax

0.0

Correlation Coefficient

Chesapeake Granite  CarMax

Pay attention - limited upside

The 3 months correlation between Chesapeake and CarMax is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Granite Wash and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Chesapeake Granite 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 Chesapeake Granite Wash 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 Chesapeake Granite i.e., Chesapeake Granite and CarMax go up and down completely randomly.

Pair Corralation between Chesapeake Granite and CarMax

Given the investment horizon of 90 days Chesapeake Granite Wash is expected to generate 0.73 times more return on investment than CarMax. However, Chesapeake Granite Wash is 1.37 times less risky than CarMax. It trades about 0.06 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.03 per unit of risk. If you would invest  106.00  in Chesapeake Granite Wash on October 4, 2024 and sell it today you would earn a total of  12.00  from holding Chesapeake Granite Wash or generate 11.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	26.35%
Values	Daily Returns

Chesapeake Granite Wash  vs.  CarMax Inc

Chesapeake Granite Wash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chesapeake Granite Wash has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Chesapeake Granite is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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. Despite nearly uncertain basic indicators, CarMax reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chesapeake Granite and CarMax

The main advantage of trading using opposite Chesapeake Granite and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Granite 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 Chesapeake Granite Wash 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.