Correlation Between Dicks Sporting and Lithia Motors
Can any of the company-specific risk be diversified away by investing in both Dicks Sporting 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 Dicks Sporting and Lithia Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dicks Sporting Goods and Lithia Motors, you can compare the effects of market volatilities on Dicks Sporting 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 Dicks Sporting with a short position of Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dicks Sporting and Lithia Motors.
Diversification Opportunities for Dicks Sporting and Lithia Motors
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dicks and Lithia is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dicks Sporting Goods and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and Dicks Sporting 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 Dicks Sporting Goods 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 Dicks Sporting i.e., Dicks Sporting and Lithia Motors go up and down completely randomly.
Pair Corralation between Dicks Sporting and Lithia Motors
Considering the 90-day investment horizon Dicks Sporting is expected to generate 3.04 times less return on investment than Lithia Motors. In addition to that, Dicks Sporting is 1.02 times more volatile than Lithia Motors. It trades about 0.13 of its total potential returns per unit of risk. Lithia Motors is currently generating about 0.39 per unit of volatility. If you would invest 33,876 in Lithia Motors on August 28, 2024 and sell it today you would earn a total of 5,551 from holding Lithia Motors or generate 16.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dicks Sporting Goods vs. Lithia Motors
Performance |
| Timeline |
| Dicks Sporting Goods |
| Lithia Motors |
Dicks Sporting and Lithia Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dicks Sporting and Lithia Motors
The main advantage of trading using opposite Dicks Sporting and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dicks Sporting 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.| Dicks Sporting vs. RH | Dicks Sporting vs. AutoZone | Dicks Sporting vs. Best Buy Co | Dicks Sporting vs. Ulta Beauty |
| Lithia Motors vs. Kingsway Financial Services | Lithia Motors vs. KAR Auction Services | Lithia Motors vs. Cango Inc | Lithia Motors vs. Vroom Inc |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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