Correlation Between 3I Group and CarMax

Can any of the company-specific risk be diversified away by investing in both 3I Group 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 3I Group and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3I Group PLC and CarMax Inc, you can compare the effects of market volatilities on 3I Group 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 3I Group with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3I Group and CarMax.

Diversification Opportunities for 3I Group and CarMax

0.92

Correlation Coefficient

3I Group  CarMax

Almost no diversification

The 3 months correlation between III and CarMax is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding 3I Group PLC and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and 3I Group 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 3I Group PLC 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 3I Group i.e., 3I Group and CarMax go up and down completely randomly.

Pair Corralation between 3I Group and CarMax

Assuming the 90 days trading horizon 3I Group PLC is expected to generate 0.99 times more return on investment than CarMax. However, 3I Group PLC is 1.01 times less risky than CarMax. It trades about -0.11 of its potential returns per unit of risk. CarMax Inc is currently generating about -0.14 per unit of risk. If you would invest  362,962  in 3I Group PLC on September 24, 2024 and sell it today you would lose (8,162) from holding 3I Group PLC or give up 2.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

3I Group PLC  vs.  CarMax Inc

3I Group PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 3I Group PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, 3I Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 3I Group and CarMax

The main advantage of trading using opposite 3I Group and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3I Group 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 3I Group PLC 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..