Correlation Between RenovoRx and CarMax

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

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

Diversification Opportunities for RenovoRx and CarMax

-0.13

Correlation Coefficient

RenovoRx  CarMax

Good diversification

The 3 months correlation between RenovoRx and CarMax is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding RenovoRx and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and RenovoRx 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 RenovoRx are associated (or correlated) with CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of RenovoRx i.e., RenovoRx and CarMax go up and down completely randomly.

Pair Corralation between RenovoRx and CarMax

Given the investment horizon of 90 days RenovoRx is expected to generate 10.12 times more return on investment than CarMax. However, RenovoRx is 10.12 times more volatile than CarMax Inc. It trades about 0.18 of its potential returns per unit of risk. CarMax Inc is currently generating about -0.07 per unit of risk. If you would invest  137.00  in RenovoRx on March 18, 2024 and sell it today you would earn a total of  66.00  from holding RenovoRx or generate 48.18% return on investment over 90 days.

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

RenovoRx  vs.  CarMax Inc

RenovoRx

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RenovoRx are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, RenovoRx unveiled solid returns over the last few months and may actually be approaching a breakup point.

CarMax Inc

Risk-Adjusted Performance

0 of 100

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 fragile 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.

Pair Trading with RenovoRx and CarMax

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

The idea behind RenovoRx and CarMax Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.