Correlation Between United Airlines and CarMax

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

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

Diversification Opportunities for United Airlines and CarMax

0.72

Correlation Coefficient

United Airlines  CarMax

Poor diversification

The 3 months correlation between United and CarMax is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding United Airlines Holdings and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and United Airlines 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 United Airlines Holdings 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 United Airlines i.e., United Airlines and CarMax go up and down completely randomly.

Pair Corralation between United Airlines and CarMax

Assuming the 90 days trading horizon United Airlines Holdings is expected to under-perform the CarMax. In addition to that, United Airlines is 3.44 times more volatile than CarMax Inc. It trades about -0.13 of its total potential returns per unit of risk. CarMax Inc is currently generating about -0.13 per unit of volatility. If you would invest  168,600  in CarMax Inc on December 21, 2024 and sell it today you would lose (11,600) from holding CarMax Inc or give up 6.88% of portfolio value over 90 days.

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

United Airlines Holdings  vs.  CarMax Inc

United Airlines Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Airlines Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company 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 weak performance, the Stock's basic 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 United Airlines and CarMax

The main advantage of trading using opposite United Airlines and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Airlines 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 United Airlines Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.