Correlation Between GDI Integrated and CarMax

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

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

Diversification Opportunities for GDI Integrated and CarMax

0.56

Correlation Coefficient

GDI Integrated  CarMax

Very weak diversification

The 3 months correlation between GDI and CarMax is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding GDI Integrated Facility and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and GDI Integrated 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 GDI Integrated Facility 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 GDI Integrated i.e., GDI Integrated and CarMax go up and down completely randomly.

Pair Corralation between GDI Integrated and CarMax

Assuming the 90 days horizon GDI Integrated Facility is expected to under-perform the CarMax. In addition to that, GDI Integrated is 1.62 times more volatile than CarMax Inc. It trades about -0.05 of its total potential returns per unit of risk. CarMax Inc is currently generating about 0.04 per unit of volatility. If you would invest  8,122  in CarMax Inc on December 2, 2024 and sell it today you would earn a total of  175.00  from holding CarMax Inc or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.02%
Values	Daily Returns

GDI Integrated Facility  vs.  CarMax Inc

GDI Integrated Facility

Risk-Adjusted Performance

Very Weak

Over the last 90 days GDI Integrated Facility has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CarMax Inc

Risk-Adjusted Performance

Very Weak

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.

Pair Trading with GDI Integrated and CarMax

The main advantage of trading using opposite GDI Integrated and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GDI Integrated 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 GDI Integrated Facility 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.