Correlation Between DIeteren Group and CarMax

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

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

Diversification Opportunities for DIeteren Group and CarMax

0.72

Correlation Coefficient

DIeteren Group  CarMax

Poor diversification

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

Pair Corralation between DIeteren Group and CarMax

Assuming the 90 days trading horizon DIeteren Group SA is expected to generate 1.6 times more return on investment than CarMax. However, DIeteren Group is 1.6 times more volatile than CarMax Inc. It trades about 0.17 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.15 per unit of risk. If you would invest  12,118  in DIeteren Group SA on September 24, 2024 and sell it today you would earn a total of  4,122  from holding DIeteren Group SA or generate 34.02% return on investment over 90 days.

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

DIeteren Group SA  vs.  CarMax Inc

DIeteren Group SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DIeteren Group SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, DIeteren Group reported solid returns over the last few months and may actually be approaching a breakup point.

CarMax Inc

Risk-Adjusted Performance

11 of 100

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.

Pair Trading with DIeteren Group and CarMax

The main advantage of trading using opposite DIeteren Group and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIeteren Group 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 DIeteren Group SA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.