Correlation Between CarMax and Foghorn Therapeutics
Can any of the company-specific risk be diversified away by investing in both CarMax and Foghorn Therapeutics 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 Foghorn Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarMax Inc and Foghorn Therapeutics, you can compare the effects of market volatilities on CarMax and Foghorn Therapeutics 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 Foghorn Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and Foghorn Therapeutics.
Diversification Opportunities for CarMax and Foghorn Therapeutics
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CarMax and Foghorn is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Foghorn Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foghorn Therapeutics 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 Foghorn Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foghorn Therapeutics has no effect on the direction of CarMax i.e., CarMax and Foghorn Therapeutics go up and down completely randomly.
Pair Corralation between CarMax and Foghorn Therapeutics
Considering the 90-day investment horizon CarMax Inc is expected to generate 0.32 times more return on investment than Foghorn Therapeutics. However, CarMax Inc is 3.11 times less risky than Foghorn Therapeutics. It trades about -0.03 of its potential returns per unit of risk. Foghorn Therapeutics is currently generating about -0.09 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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CarMax Inc vs. Foghorn Therapeutics
Performance |
Timeline |
CarMax Inc |
Foghorn Therapeutics |
CarMax and Foghorn Therapeutics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CarMax and Foghorn Therapeutics
The main advantage of trading using opposite CarMax and Foghorn Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Foghorn Therapeutics 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 Foghorn Therapeutics will offset losses from the drop in Foghorn Therapeutics' long position.CarMax vs. Lithia Motors | CarMax vs. AutoNation | CarMax vs. Penske Automotive Group | CarMax vs. Group 1 Automotive |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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