Correlation Between CarMax and Allovir

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

Diversification Opportunities for CarMax and Allovir

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between CarMax and Allovir is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding CarMax Inc and Allovir in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allovir 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 Allovir. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allovir has no effect on the direction of CarMax i.e., CarMax and Allovir go up and down completely randomly.

Pair Corralation between CarMax and Allovir

Considering the 90-day investment horizon CarMax Inc is expected to under-perform the Allovir. In addition to that, CarMax is 1.16 times more volatile than Allovir. It trades about -0.14 of its total potential returns per unit of risk. Allovir is currently generating about 0.18 per unit of volatility. If you would invest  726.00  in Allovir on July 6, 2022 and sell it today you would earn a total of  131.00  from holding Allovir or generate 18.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CarMax Inc  vs.  Allovir

 Performance (%) 
       Timeline  
CarMax Inc 
CarMax Performance
0 of 100
Over the last 90 days CarMax Inc 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 primary indicators remain fairly strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

CarMax Price Channel

Allovir 
Allovir Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Allovir are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Allovir reported solid returns over the last few months and may actually be approaching a breakup point.

Allovir Price Channel

CarMax and Allovir Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CarMax and Allovir

The main advantage of trading using opposite CarMax and Allovir positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CarMax position performs unexpectedly, Allovir 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 Allovir will offset losses from the drop in Allovir's long position.
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The idea behind CarMax Inc and Allovir 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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