Correlation Between Buckle and Americas Car

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

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

Diversification Opportunities for Buckle and Americas Car

0.67

Correlation Coefficient

Buckle  Americas Car

Poor diversification

The 3 months correlation between Buckle and Americas is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Buckle Inc and Americas Car Mart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Americas Car Mart and Buckle 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 Buckle Inc are associated (or correlated) with Americas Car. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Americas Car Mart has no effect on the direction of Buckle i.e., Buckle and Americas Car go up and down completely randomly.

Pair Corralation between Buckle and Americas Car

Considering the 90-day investment horizon Buckle Inc is expected to generate 0.55 times more return on investment than Americas Car. However, Buckle Inc is 1.8 times less risky than Americas Car. It trades about 0.04 of its potential returns per unit of risk. Americas Car Mart is currently generating about -0.01 per unit of risk. If you would invest  2,678  in Buckle Inc on February 24, 2024 and sell it today you would earn a total of  969.00  from holding Buckle Inc or generate 36.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Buckle Inc  vs.  Americas Car Mart

Buckle Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Buckle Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Americas Car Mart

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Americas Car Mart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Americas Car is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Buckle and Americas Car

The main advantage of trading using opposite Buckle and Americas Car positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Buckle position performs unexpectedly, Americas Car 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 Americas Car will offset losses from the drop in Americas Car's long position.

The idea behind Buckle Inc and Americas Car Mart 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.