Correlation Between Gold Road and CarMax
Can any of the company-specific risk be diversified away by investing in both Gold Road 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 Gold Road and CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Road Resources and CarMax Inc, you can compare the effects of market volatilities on Gold Road 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 Gold Road with a short position of CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Road and CarMax.
Diversification Opportunities for Gold Road and CarMax
Good diversification
The 3 months correlation between Gold and CarMax is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc and Gold Road 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 Gold Road Resources 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 Gold Road i.e., Gold Road and CarMax go up and down completely randomly.
Pair Corralation between Gold Road and CarMax
Assuming the 90 days horizon Gold Road Resources is expected to generate 1.28 times more return on investment than CarMax. However, Gold Road is 1.28 times more volatile than CarMax Inc. It trades about 0.1 of its potential returns per unit of risk. CarMax Inc is currently generating about -0.36 per unit of risk. If you would invest 101.00 in Gold Road Resources on January 25, 2024 and sell it today you would earn a total of 6.00 from holding Gold Road Resources or generate 5.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Road Resources vs. CarMax Inc
Performance |
| Timeline |
| Gold Road Resources |
| CarMax Inc |
Gold Road and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Road and CarMax
The main advantage of trading using opposite Gold Road and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road 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.| Gold Road vs. Collective Mining | Gold Road vs. Tudor Gold Corp | Gold Road vs. Caledonia Mining | Gold Road vs. Tanzanian Royalty Exploration |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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