Correlation Between Dupont De and CarMax

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

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

Diversification Opportunities for Dupont De and CarMax

-0.69

Correlation Coefficient

Dupont De  CarMax

Excellent diversification

The 3 months correlation between Dupont and CarMax is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and CarMax go up and down completely randomly.

Pair Corralation between Dupont De and CarMax

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the CarMax. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 1.5 times less risky than CarMax. The stock trades about -0.59 of its potential returns per unit of risk. The CarMax Inc is currently generating about -0.28 of returns per unit of risk over similar time horizon. If you would invest  8,110  in CarMax Inc on October 9, 2024 and sell it today you would lose (502.00) from holding CarMax Inc or give up 6.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

Dupont De Nemours  vs.  CarMax Inc

Dupont De Nemours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 Dupont De and CarMax

The main advantage of trading using opposite Dupont De and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.