Correlation Between Lithia Motors and Chijet
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Chijet 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 Chijet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Chijet Motor Company,, you can compare the effects of market volatilities on Lithia Motors and Chijet 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 Chijet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Chijet.
Diversification Opportunities for Lithia Motors and Chijet
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Lithia and Chijet is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Chijet Motor Company, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chijet Motor , 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 Chijet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chijet Motor , has no effect on the direction of Lithia Motors i.e., Lithia Motors and Chijet go up and down completely randomly.
Pair Corralation between Lithia Motors and Chijet
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.23 times more return on investment than Chijet. However, Lithia Motors is 4.35 times less risky than Chijet. It trades about 0.06 of its potential returns per unit of risk. Chijet Motor Company, is currently generating about -0.05 per unit of risk. If you would invest 21,562 in Lithia Motors on August 31, 2024 and sell it today you would earn a total of 17,128 from holding Lithia Motors or generate 79.44% 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. Chijet Motor Company,
Performance |
| Timeline |
| Lithia Motors |
| Chijet Motor , |
Lithia Motors and Chijet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Chijet
The main advantage of trading using opposite Lithia Motors and Chijet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Chijet 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 Chijet will offset losses from the drop in Chijet's long position.| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors vs. Penske Automotive Group |
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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 the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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