Correlation Between Zhongsheng Group and Lithia Motors
Can any of the company-specific risk be diversified away by investing in both Zhongsheng Group and Lithia Motors 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 Zhongsheng Group and Lithia Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zhongsheng Group Holdings and Lithia Motors, you can compare the effects of market volatilities on Zhongsheng Group and Lithia Motors 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 Zhongsheng Group with a short position of Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongsheng Group and Lithia Motors.
Diversification Opportunities for Zhongsheng Group and Lithia Motors
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Zhongsheng and Lithia is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Zhongsheng Group Holdings and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and Zhongsheng Group 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 Zhongsheng Group Holdings are associated (or correlated) with Lithia Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithia Motors has no effect on the direction of Zhongsheng Group i.e., Zhongsheng Group and Lithia Motors go up and down completely randomly.
Pair Corralation between Zhongsheng Group and Lithia Motors
Assuming the 90 days horizon Zhongsheng Group Holdings is expected to generate 3.59 times more return on investment than Lithia Motors. However, Zhongsheng Group is 3.59 times more volatile than Lithia Motors. It trades about 0.07 of its potential returns per unit of risk. Lithia Motors is currently generating about 0.07 per unit of risk. If you would invest 80.00 in Zhongsheng Group Holdings on September 3, 2024 and sell it today you would earn a total of 103.00 from holding Zhongsheng Group Holdings or generate 128.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zhongsheng Group Holdings vs. Lithia Motors
Performance |
| Timeline |
| Zhongsheng Group Holdings |
| Lithia Motors |
Zhongsheng Group and Lithia Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zhongsheng Group and Lithia Motors
The main advantage of trading using opposite Zhongsheng Group and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongsheng Group position performs unexpectedly, Lithia Motors 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 Lithia Motors will offset losses from the drop in Lithia Motors' long position.| Zhongsheng Group vs. LION ONE METALS | Zhongsheng Group vs. Chuangs China Investments | Zhongsheng Group vs. Strategic Investments AS | Zhongsheng Group vs. Lion One Metals |
| Lithia Motors vs. GRUPO CARSO A1 | Lithia Motors vs. Commercial Vehicle Group | Lithia Motors vs. Motorcar Parts of | Lithia Motors vs. Wizz Air Holdings |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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