Correlation Between CarMax and First Physicians

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

By analyzing existing cross correlation between CarMax Inc and First Physicians Capital, you can compare the effects of market volatilities on CarMax and First Physicians 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 First Physicians. Check out your portfolio center. Please also check ongoing floating volatility patterns of CarMax and First Physicians.

Diversification Opportunities for CarMax and First Physicians

0.0

Correlation Coefficient

CarMax  First Physicians

Pay attention - limited upside

The 3 months correlation between CarMax and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and First Physicians Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Physicians Capital 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 First Physicians. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Physicians Capital has no effect on the direction of CarMax i.e., CarMax and First Physicians go up and down completely randomly.

Pair Corralation between CarMax and First Physicians

If you would invest  102,500  in First Physicians Capital on January 16, 2024 and sell it today you would earn a total of  0.00  from holding First Physicians Capital or generate 0.0% return on investment over 90 days.

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

CarMax Inc  vs.  First Physicians Capital

CarMax Inc

Risk-Adjusted Performance

0 of 100

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 fairly strong primary indicators, CarMax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

First Physicians Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Physicians Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, First Physicians is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CarMax and First Physicians

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

The idea behind CarMax Inc and First Physicians Capital 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.