Correlation Between Cintas and CarMax

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Can any of the company-specific risk be diversified away by investing in both Cintas 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 Cintas and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cintas and CarMax Inc, you can compare the effects of market volatilities on Cintas 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 Cintas with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cintas and CarMax.

Diversification Opportunities for Cintas and CarMax

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Cintas and CarMax is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cintas and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Cintas 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 Cintas 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 Cintas i.e., Cintas and CarMax go up and down completely randomly.

Pair Corralation between Cintas and CarMax

Given the investment horizon of 90 days Cintas is expected to generate 0.77 times more return on investment than CarMax. However, Cintas is 1.3 times less risky than CarMax. It trades about 0.13 of its potential returns per unit of risk. CarMax Inc is currently generating about -0.05 per unit of risk. If you would invest  18,333  in Cintas on December 28, 2024 and sell it today you would earn a total of  2,138  from holding Cintas or generate 11.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cintas  vs.  CarMax Inc

 Performance 
       Timeline  
Cintas 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Cintas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Cintas may actually be approaching a critical reversion point that can send shares even higher in April 2025.
CarMax Inc 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days CarMax Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, CarMax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Cintas and CarMax Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cintas and CarMax

The main advantage of trading using opposite Cintas and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cintas 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 Cintas 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.
Check out your portfolio center.
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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