Correlation Between Lithia Motors and Envela Corp
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Envela Corp 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 Envela Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Envela Corp, you can compare the effects of market volatilities on Lithia Motors and Envela Corp 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 Envela Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Envela Corp.
Diversification Opportunities for Lithia Motors and Envela Corp
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lithia and Envela is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Envela Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envela Corp 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 Envela Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envela Corp has no effect on the direction of Lithia Motors i.e., Lithia Motors and Envela Corp go up and down completely randomly.
Pair Corralation between Lithia Motors and Envela Corp
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.8 times more return on investment than Envela Corp. However, Lithia Motors is 1.25 times less risky than Envela Corp. It trades about 0.06 of its potential returns per unit of risk. Envela Corp is currently generating about 0.03 per unit of risk. If you would invest 21,527 in Lithia Motors on August 26, 2024 and sell it today you would earn a total of 17,559 from holding Lithia Motors or generate 81.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. Envela Corp
Performance |
| Timeline |
| Lithia Motors |
| Envela Corp |
Lithia Motors and Envela Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Envela Corp
The main advantage of trading using opposite Lithia Motors and Envela Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Envela Corp 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 Envela Corp will offset losses from the drop in Envela Corp's long position.| Lithia Motors vs. Kingsway Financial Services | Lithia Motors vs. KAR Auction Services | Lithia Motors vs. Cango Inc | Lithia Motors vs. Vroom Inc |
| Envela Corp vs. Movado Group | Envela Corp vs. MYT Netherlands Parent | Envela Corp vs. Tapestry | Envela Corp vs. Capri 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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