Correlation Between Lithia Motors and ODP Corp
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and ODP 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 ODP 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 ODP Corp, you can compare the effects of market volatilities on Lithia Motors and ODP 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 ODP Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and ODP Corp.
Diversification Opportunities for Lithia Motors and ODP Corp
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lithia and ODP is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and ODP Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODP 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 ODP Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODP Corp has no effect on the direction of Lithia Motors i.e., Lithia Motors and ODP Corp go up and down completely randomly.
Pair Corralation between Lithia Motors and ODP Corp
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.91 times more return on investment than ODP Corp. However, Lithia Motors is 1.1 times less risky than ODP Corp. It trades about 0.22 of its potential returns per unit of risk. ODP Corp is currently generating about -0.07 per unit of risk. If you would invest 32,037 in Lithia Motors on August 28, 2024 and sell it today you would earn a total of 7,390 from holding Lithia Motors or generate 23.07% 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. ODP Corp
Performance |
| Timeline |
| Lithia Motors |
| ODP Corp |
Lithia Motors and ODP Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and ODP Corp
The main advantage of trading using opposite Lithia Motors and ODP Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, ODP 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 ODP Corp will offset losses from the drop in ODP Corp's long position.| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors vs. Penske Automotive Group |
| ODP Corp vs. Oriental Culture Holding | ODP Corp vs. Hour Loop | ODP Corp vs. Qurate Retail Series | ODP Corp vs. Emerge Commerce |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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