Correlation Between CarMax and SunCar Technology

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

By analyzing existing cross correlation between CarMax Inc and SunCar Technology Group, you can compare the effects of market volatilities on CarMax and SunCar Technology 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 SunCar Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and SunCar Technology.

Diversification Opportunities for CarMax and SunCar Technology

0.07

Correlation Coefficient

CarMax  SunCar Technology

Significant diversification

The 3 months correlation between CarMax and SunCar is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and SunCar Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SunCar Technology 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 SunCar Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SunCar Technology has no effect on the direction of CarMax i.e., CarMax and SunCar Technology go up and down completely randomly.

Pair Corralation between CarMax and SunCar Technology

Considering the 90-day investment horizon CarMax is expected to generate 6.34 times less return on investment than SunCar Technology. But when comparing it to its historical volatility, CarMax Inc is 2.36 times less risky than SunCar Technology. It trades about 0.02 of its potential returns per unit of risk. SunCar Technology Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  961.00  in SunCar Technology Group on September 3, 2024 and sell it today you would earn a total of  81.00  from holding SunCar Technology Group or generate 8.43% return on investment over 90 days.

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

CarMax Inc  vs.  SunCar Technology Group

CarMax Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

SunCar Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SunCar Technology Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, SunCar Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CarMax and SunCar Technology

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

The idea behind CarMax Inc and SunCar Technology Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.