Correlation Between Ethereum and CarMax

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

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

Diversification Opportunities for Ethereum and CarMax

0.79

Correlation Coefficient

Ethereum  CarMax

Poor diversification

The 3 months correlation between Ethereum and CarMax is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Ethereum 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 Ethereum 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 Ethereum i.e., Ethereum and CarMax go up and down completely randomly.

Pair Corralation between Ethereum and CarMax

Assuming the 90 days trading horizon Ethereum is expected to generate 2.22 times more return on investment than CarMax. However, Ethereum is 2.22 times more volatile than CarMax Inc. It trades about 0.14 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.12 per unit of risk. If you would invest  243,620  in Ethereum on October 24, 2024 and sell it today you would earn a total of  89,288  from holding Ethereum or generate 36.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

Ethereum  vs.  CarMax Inc

Ethereum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

CarMax Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CarMax unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethereum and CarMax

The main advantage of trading using opposite Ethereum and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum 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 Ethereum 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.