Correlation Between Aramark Holdings and CarMax
Can any of the company-specific risk be diversified away by investing in both Aramark Holdings 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 Aramark Holdings and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aramark Holdings and CarMax Inc, you can compare the effects of market volatilities on Aramark Holdings 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 Aramark Holdings with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aramark Holdings and CarMax.
Diversification Opportunities for Aramark Holdings and CarMax
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aramark and CarMax is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aramark Holdings and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Aramark Holdings 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 Aramark 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 Aramark Holdings i.e., Aramark Holdings and CarMax go up and down completely randomly.
Pair Corralation between Aramark Holdings and CarMax
Given the investment horizon of 90 days Aramark Holdings is expected to generate 1.3 times less return on investment than CarMax. But when comparing it to its historical volatility, Aramark Holdings is 1.41 times less risky than CarMax. It trades about 0.04 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,512 in CarMax Inc on September 25, 2024 and sell it today you would earn a total of 1,979 from holding CarMax Inc or generate 30.39% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Aramark Holdings vs. CarMax Inc
Performance |
Timeline |
Aramark Holdings |
CarMax Inc |
Aramark Holdings and CarMax Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aramark Holdings and CarMax
The main advantage of trading using opposite Aramark Holdings and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aramark Holdings 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.Aramark Holdings vs. Civeo Corp | Aramark Holdings vs. ABM Industries Incorporated | Aramark Holdings vs. ADM Endeavors | Aramark Holdings vs. Maximus |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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