Correlation Between CarMax and Paylocity Holdng

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

Diversification Opportunities for CarMax and Paylocity Holdng

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CarMax and Paylocity is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Paylocity Holdng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paylocity Holdng 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 Paylocity Holdng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paylocity Holdng has no effect on the direction of CarMax i.e., CarMax and Paylocity Holdng go up and down completely randomly.

Pair Corralation between CarMax and Paylocity Holdng

Considering the 90-day investment horizon CarMax Inc is expected to generate 0.91 times more return on investment than Paylocity Holdng. However, CarMax Inc is 1.1 times less risky than Paylocity Holdng. It trades about -0.03 of its potential returns per unit of risk. Paylocity Holdng is currently generating about -0.63 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 Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

CarMax Inc  vs.  Paylocity Holdng

 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.
Paylocity Holdng 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Paylocity Holdng has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic 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.

CarMax and Paylocity Holdng Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CarMax and Paylocity Holdng

The main advantage of trading using opposite CarMax and Paylocity Holdng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Paylocity Holdng 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 Paylocity Holdng will offset losses from the drop in Paylocity Holdng's long position.
The idea behind CarMax Inc and Paylocity Holdng 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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