Correlation Between Group 1 and LCI Industries
Can any of the company-specific risk be diversified away by investing in both Group 1 and LCI Industries 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 Group 1 and LCI Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Group 1 Automotive and LCI Industries, you can compare the effects of market volatilities on Group 1 and LCI Industries 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 Group 1 with a short position of LCI Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and LCI Industries.
Diversification Opportunities for Group 1 and LCI Industries
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Group and LCI is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and LCI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCI Industries and Group 1 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 Group 1 Automotive are associated (or correlated) with LCI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCI Industries has no effect on the direction of Group 1 i.e., Group 1 and LCI Industries go up and down completely randomly.
Pair Corralation between Group 1 and LCI Industries
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.58 times more return on investment than LCI Industries. However, Group 1 Automotive is 1.71 times less risky than LCI Industries. It trades about 0.35 of its potential returns per unit of risk. LCI Industries is currently generating about 0.16 per unit of risk. If you would invest 41,846 in Group 1 Automotive on October 24, 2024 and sell it today you would earn a total of 2,915 from holding Group 1 Automotive or generate 6.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Group 1 Automotive vs. LCI Industries
Performance |
| Timeline |
| Group 1 Automotive |
| LCI Industries |
Group 1 and LCI Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 1 and LCI Industries
The main advantage of trading using opposite Group 1 and LCI Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, LCI Industries 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 LCI Industries will offset losses from the drop in LCI Industries' long position.| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
| LCI Industries vs. MCBC Holdings | LCI Industries vs. BRP Inc | LCI Industries vs. Malibu Boats | LCI Industries vs. Winnebago Industries |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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