Correlation Between CarMax and Aramark Holdings

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

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

Diversification Opportunities for CarMax and Aramark Holdings

0.26

Correlation Coefficient

CarMax  Aramark Holdings

Modest diversification

The 3 months correlation between CarMax and Aramark is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Aramark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aramark Holdings and CarMax 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 CarMax Inc are associated (or correlated) with Aramark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aramark Holdings has no effect on the direction of CarMax i.e., CarMax and Aramark Holdings go up and down completely randomly.

Pair Corralation between CarMax and Aramark Holdings

Considering the 90-day investment horizon CarMax Inc is expected to generate 1.2 times more return on investment than Aramark Holdings. However, CarMax is 1.2 times more volatile than Aramark Holdings. It trades about -0.01 of its potential returns per unit of risk. Aramark Holdings is currently generating about -0.11 per unit of risk. If you would invest  8,397  in CarMax Inc on November 29, 2024 and sell it today you would lose (145.00) from holding CarMax Inc or give up 1.73% of portfolio value over 90 days.

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

CarMax Inc  vs.  Aramark Holdings

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.

Aramark Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aramark Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with CarMax and Aramark Holdings

The main advantage of trading using opposite CarMax and Aramark Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Aramark Holdings 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 Aramark Holdings will offset losses from the drop in Aramark Holdings' long position.

The idea behind CarMax Inc and Aramark Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.