Correlation Between Triad Group and CarMax

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

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

Diversification Opportunities for Triad Group and CarMax

-0.03

Correlation Coefficient

Triad Group  CarMax

Good diversification

The 3 months correlation between Triad and CarMax is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Triad Group PLC and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Triad 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 Triad Group PLC 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 Triad Group i.e., Triad Group and CarMax go up and down completely randomly.

Pair Corralation between Triad Group and CarMax

Assuming the 90 days trading horizon Triad Group is expected to generate 1.67 times less return on investment than CarMax. In addition to that, Triad Group is 1.11 times more volatile than CarMax Inc. It trades about 0.04 of its total potential returns per unit of risk. CarMax Inc is currently generating about 0.08 per unit of volatility. If you would invest  7,826  in CarMax Inc on September 26, 2024 and sell it today you would earn a total of  674.00  from holding CarMax Inc or generate 8.61% return on investment over 90 days.

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

Triad Group PLC  vs.  CarMax Inc

Triad Group PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Triad Group PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Triad Group is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

CarMax Inc

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CarMax Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CarMax may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Triad Group and CarMax

The main advantage of trading using opposite Triad Group and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Triad 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 Triad Group PLC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.