Correlation Between Lithia Motors and Continental
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Continental 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 Lithia Motors and Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Caleres, you can compare the effects of market volatilities on Lithia Motors and Continental 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 Lithia Motors with a short position of Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Continental.
Diversification Opportunities for Lithia Motors and Continental
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lithia and Continental is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental and Lithia Motors 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 Lithia Motors are associated (or correlated) with Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Lithia Motors i.e., Lithia Motors and Continental go up and down completely randomly.
Pair Corralation between Lithia Motors and Continental
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.75 times more return on investment than Continental. However, Lithia Motors is 1.34 times less risky than Continental. It trades about 0.31 of its potential returns per unit of risk. Caleres is currently generating about 0.07 per unit of risk. If you would invest 33,942 in Lithia Motors on August 31, 2024 and sell it today you would earn a total of 4,674 from holding Lithia Motors or generate 13.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. Caleres
Performance |
| Timeline |
| Lithia Motors |
| Continental |
Lithia Motors and Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Continental
The main advantage of trading using opposite Lithia Motors and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors vs. Penske Automotive Group |
| Continental vs. Vera Bradley | Continental vs. Wolverine World Wide | Continental vs. Rocky Brands | Continental vs. Steven Madden |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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