Correlation Between Lithia Motors and Mitsubishi UFJ
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Mitsubishi UFJ 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 Mitsubishi UFJ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Mitsubishi UFJ Lease, you can compare the effects of market volatilities on Lithia Motors and Mitsubishi UFJ 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 Mitsubishi UFJ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Mitsubishi UFJ.
Diversification Opportunities for Lithia Motors and Mitsubishi UFJ
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lithia and Mitsubishi is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Mitsubishi UFJ Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi UFJ Lease 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 Mitsubishi UFJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi UFJ Lease has no effect on the direction of Lithia Motors i.e., Lithia Motors and Mitsubishi UFJ go up and down completely randomly.
Pair Corralation between Lithia Motors and Mitsubishi UFJ
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.59 times more return on investment than Mitsubishi UFJ. However, Lithia Motors is 1.71 times less risky than Mitsubishi UFJ. It trades about 0.22 of its potential returns per unit of risk. Mitsubishi UFJ Lease is currently generating about 0.1 per unit of risk. If you would invest 34,873 in Lithia Motors on November 3, 2024 and sell it today you would earn a total of 2,737 from holding Lithia Motors or generate 7.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lithia Motors vs. Mitsubishi UFJ Lease
Performance |
| Timeline |
| Lithia Motors |
| Mitsubishi UFJ Lease |
Lithia Motors and Mitsubishi UFJ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Mitsubishi UFJ
The main advantage of trading using opposite Lithia Motors and Mitsubishi UFJ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Mitsubishi UFJ 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 Mitsubishi UFJ will offset losses from the drop in Mitsubishi UFJ'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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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