Correlation Between Lithia Motors and CarMax
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and CarMax 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 CarMax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and CarMax Inc, you can compare the effects of market volatilities on Lithia Motors and CarMax 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 CarMax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and CarMax.
Diversification Opportunities for Lithia Motors and CarMax
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lithia and CarMax is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and CarMax Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarMax Inc 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 CarMax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarMax Inc has no effect on the direction of Lithia Motors i.e., Lithia Motors and CarMax go up and down completely randomly.
Pair Corralation between Lithia Motors and CarMax
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.95 times more return on investment than CarMax. However, Lithia Motors is 1.05 times less risky than CarMax. It trades about 0.39 of its potential returns per unit of risk. CarMax Inc is currently generating about 0.33 per unit of risk. If you would invest 33,876 in Lithia Motors on August 27, 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 | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. CarMax Inc
Performance |
| Timeline |
| Lithia Motors |
| CarMax Inc |
Lithia Motors and CarMax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and CarMax
The main advantage of trading using opposite Lithia Motors and CarMax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, CarMax 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 CarMax will offset losses from the drop in CarMax'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 |
| CarMax vs. Kingsway Financial Services | CarMax vs. KAR Auction Services | CarMax vs. Cango Inc | CarMax 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |