Correlation Between Futura Medical and CarMax

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

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

Diversification Opportunities for Futura Medical and CarMax

-0.39

Correlation Coefficient

Futura Medical  CarMax

Very good diversification

The 3 months correlation between Futura and CarMax is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Futura Medical and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Futura Medical 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 Futura Medical 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 Futura Medical i.e., Futura Medical and CarMax go up and down completely randomly.

Pair Corralation between Futura Medical and CarMax

Assuming the 90 days trading horizon Futura Medical is expected to under-perform the CarMax. In addition to that, Futura Medical is 1.41 times more volatile than CarMax Inc. It trades about -0.03 of its total potential returns per unit of risk. CarMax Inc is currently generating about 0.07 per unit of volatility. If you would invest  7,193  in CarMax Inc on September 29, 2024 and sell it today you would earn a total of  1,154  from holding CarMax Inc or generate 16.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.45%
Values	Daily Returns

Futura Medical  vs.  CarMax Inc

Futura Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Futura Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Futura Medical is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CarMax Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 5 (%) 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 Futura Medical and CarMax

The main advantage of trading using opposite Futura Medical and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Futura Medical 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 Futura Medical 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.