Correlation Between Falcon Oil and CarMax

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

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

Diversification Opportunities for Falcon Oil and CarMax

-0.79

Correlation Coefficient

Falcon Oil  CarMax

Pay attention - limited upside

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

Pair Corralation between Falcon Oil and CarMax

Assuming the 90 days trading horizon Falcon Oil Gas is expected to under-perform the CarMax. In addition to that, Falcon Oil is 2.1 times more volatile than CarMax Inc. It trades about -0.22 of its total potential returns per unit of risk. CarMax Inc is currently generating about -0.14 per unit of volatility. If you would invest  8,569  in CarMax Inc on September 24, 2024 and sell it today you would lose (241.00) from holding CarMax Inc or give up 2.81% of portfolio value over 90 days.

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

Falcon Oil Gas  vs.  CarMax Inc

Falcon Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CarMax Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CarMax may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Falcon Oil and CarMax

The main advantage of trading using opposite Falcon Oil and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcon Oil 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 Falcon Oil Gas 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.