Correlation Between Kingsway Financial and CarMax

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

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

Diversification Opportunities for Kingsway Financial and CarMax

0.52

Correlation Coefficient

Kingsway Financial  CarMax

Very weak diversification

The 3 months correlation between Kingsway and CarMax is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kingsway Financial Services and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Kingsway Financial 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 Kingsway Financial Services 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 Kingsway Financial i.e., Kingsway Financial and CarMax go up and down completely randomly.

Pair Corralation between Kingsway Financial and CarMax

Considering the 90-day investment horizon Kingsway Financial Services is expected to generate 1.07 times more return on investment than CarMax. However, Kingsway Financial is 1.07 times more volatile than CarMax Inc. It trades about -0.03 of its potential returns per unit of risk. CarMax Inc is currently generating about -0.06 per unit of risk. If you would invest  846.00  in Kingsway Financial Services on December 28, 2024 and sell it today you would lose (41.00) from holding Kingsway Financial Services or give up 4.85% of portfolio value over 90 days.

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

Kingsway Financial Services  vs.  CarMax Inc

Kingsway Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Kingsway Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kingsway Financial and CarMax

The main advantage of trading using opposite Kingsway Financial and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingsway Financial 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 Kingsway Financial Services 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..