Correlation Between CarMax and Globex Mining

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

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

Diversification Opportunities for CarMax and Globex Mining

0.62

Correlation Coefficient

CarMax  Globex Mining

Poor diversification

The 3 months correlation between CarMax and Globex is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises 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 Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of CarMax i.e., CarMax and Globex Mining go up and down completely randomly.

Pair Corralation between CarMax and Globex Mining

Assuming the 90 days horizon CarMax is expected to generate 1.14 times less return on investment than Globex Mining. In addition to that, CarMax is 1.4 times more volatile than Globex Mining Enterprises. It trades about 0.16 of its total potential returns per unit of risk. Globex Mining Enterprises is currently generating about 0.25 per unit of volatility. If you would invest  65.00  in Globex Mining Enterprises on October 9, 2024 and sell it today you would earn a total of  14.00  from holding Globex Mining Enterprises or generate 21.54% return on investment over 90 days.

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

CarMax Inc  vs.  Globex Mining Enterprises

CarMax Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CarMax reported solid returns over the last few months and may actually be approaching a breakup point.

Globex Mining Enterprises

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Globex Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CarMax and Globex Mining

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

The idea behind CarMax Inc and Globex Mining Enterprises 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.