Correlation Between CarMax and Singapore ReinsuranceLimit

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

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

Diversification Opportunities for CarMax and Singapore ReinsuranceLimit

0.78

Correlation Coefficient

CarMax  Singapore ReinsuranceLimit

Poor diversification

The 3 months correlation between CarMax and Singapore is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Singapore Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore ReinsuranceLimit 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 Singapore ReinsuranceLimit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore ReinsuranceLimit has no effect on the direction of CarMax i.e., CarMax and Singapore ReinsuranceLimit go up and down completely randomly.

Pair Corralation between CarMax and Singapore ReinsuranceLimit

Assuming the 90 days horizon CarMax Inc is expected to under-perform the Singapore ReinsuranceLimit. In addition to that, CarMax is 1.33 times more volatile than Singapore Reinsurance. It trades about -0.03 of its total potential returns per unit of risk. Singapore Reinsurance is currently generating about 0.01 per unit of volatility. If you would invest  3,500  in Singapore Reinsurance on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Singapore Reinsurance or generate 0.0% 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.  Singapore Reinsurance

CarMax Inc

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days CarMax Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, CarMax reported solid returns over the last few months and may actually be approaching a breakup point.

Singapore ReinsuranceLimit

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Singapore Reinsurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively fragile basic indicators, Singapore ReinsuranceLimit unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CarMax and Singapore ReinsuranceLimit

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

The idea behind CarMax Inc and Singapore Reinsurance 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.