Correlation Between Maximus and CarMax

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

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

Diversification Opportunities for Maximus and CarMax

0.2

Correlation Coefficient

Maximus  CarMax

Modest diversification

The 3 months correlation between Maximus and CarMax is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Maximus and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Maximus 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 Maximus 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 Maximus i.e., Maximus and CarMax go up and down completely randomly.

Pair Corralation between Maximus and CarMax

Considering the 90-day investment horizon Maximus is expected to under-perform the CarMax. But the stock apears to be less risky and, when comparing its historical volatility, Maximus is 1.02 times less risky than CarMax. The stock trades about -0.06 of its potential returns per unit of risk. The CarMax Inc is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  8,206  in CarMax Inc on December 28, 2024 and sell it today you would lose (513.00) from holding CarMax Inc or give up 6.25% of portfolio value over 90 days.

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

Maximus  vs.  CarMax Inc

Maximus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maximus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm 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 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 Maximus and CarMax

The main advantage of trading using opposite Maximus and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maximus 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 Maximus 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.