Correlation Between Samsung Electronics and CarMax

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

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

Diversification Opportunities for Samsung Electronics and CarMax

-0.67

Correlation Coefficient

Samsung Electronics  CarMax

Excellent diversification

The 3 months correlation between Samsung and CarMax is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Samsung Electronics Co and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Samsung Electronics 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 Samsung Electronics Co 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 Samsung Electronics i.e., Samsung Electronics and CarMax go up and down completely randomly.

Pair Corralation between Samsung Electronics and CarMax

Assuming the 90 days trading horizon Samsung Electronics Co is expected to under-perform the CarMax. But the stock apears to be less risky and, when comparing its historical volatility, Samsung Electronics Co is 1.32 times less risky than CarMax. The stock trades about -0.13 of its potential returns per unit of risk. The CarMax Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  137,111  in CarMax Inc on September 27, 2024 and sell it today you would earn a total of  31,489  from holding CarMax Inc or generate 22.97% return on investment over 90 days.

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

Samsung Electronics Co  vs.  CarMax Inc

Samsung Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Samsung Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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. In spite of fairly weak basic indicators, CarMax showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Samsung Electronics and CarMax

The main advantage of trading using opposite Samsung Electronics and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Samsung Electronics 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 Samsung Electronics Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.