Correlation Between CarMax and Chevron Corp

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

Diversification Opportunities for CarMax and Chevron Corp

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between CarMax and Chevron is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and CarMax 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 CarMax Inc are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of CarMax i.e., CarMax and Chevron Corp go up and down completely randomly.

Pair Corralation between CarMax and Chevron Corp

Considering the 90-day investment horizon CarMax Inc is expected to generate 1.51 times more return on investment than Chevron Corp. However, CarMax is 1.51 times more volatile than Chevron Corp. It trades about -0.03 of its potential returns per unit of risk. Chevron Corp is currently generating about -0.2 per unit of risk. If you would invest  7,257  in CarMax Inc on March 21, 2024 and sell it today you would lose (107.00) from holding CarMax Inc or give up 1.47% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CarMax Inc  vs.  Chevron Corp

 Performance 
       Timeline  
CarMax Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CarMax Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Chevron Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CarMax and Chevron Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CarMax and Chevron Corp

The main advantage of trading using opposite CarMax and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.
The idea behind CarMax Inc and Chevron Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

Other Complementary Tools

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
Watchlist Optimization
Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm
Top Crypto Exchanges
Search and analyze digital assets across top global cryptocurrency exchanges
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Equity Forecasting
Use basic forecasting models to generate price predictions and determine price momentum