Correlation Between Asbury Automotive and CarMax

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Asbury Automotive 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 Asbury Automotive and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asbury Automotive Group and CarMax Inc, you can compare the effects of market volatilities on Asbury Automotive 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 Asbury Automotive with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asbury Automotive and CarMax.

Diversification Opportunities for Asbury Automotive and CarMax

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Asbury and CarMax is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Asbury Automotive Group and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Asbury Automotive 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 Asbury Automotive Group 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 Asbury Automotive i.e., Asbury Automotive and CarMax go up and down completely randomly.

Pair Corralation between Asbury Automotive and CarMax

Assuming the 90 days horizon Asbury Automotive is expected to generate 1.17 times less return on investment than CarMax. In addition to that, Asbury Automotive is 1.09 times more volatile than CarMax Inc. It trades about 0.12 of its total potential returns per unit of risk. CarMax Inc is currently generating about 0.15 per unit of volatility. If you would invest  6,828  in CarMax Inc on September 24, 2024 and sell it today you would earn a total of  1,218  from holding CarMax Inc or generate 17.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Asbury Automotive Group  vs.  CarMax Inc

 Performance 
       Timeline  
Asbury Automotive 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Asbury Automotive Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Asbury Automotive reported solid returns over the last few months and may actually be approaching a breakup point.
CarMax Inc 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 11 (%) 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.

Asbury Automotive and CarMax Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Asbury Automotive and CarMax

The main advantage of trading using opposite Asbury Automotive and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asbury Automotive 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 Asbury Automotive Group 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.
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

Other Complementary Tools

USA ETFs
Find actively traded Exchange Traded Funds (ETF) in USA
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing