Correlation Between Lithia Motors and Revolve Group
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Revolve Group 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 Revolve Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Revolve Group LLC, you can compare the effects of market volatilities on Lithia Motors and Revolve Group 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 Revolve Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Revolve Group.
Diversification Opportunities for Lithia Motors and Revolve Group
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lithia and Revolve is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Revolve Group LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolve Group LLC 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 Revolve Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolve Group LLC has no effect on the direction of Lithia Motors i.e., Lithia Motors and Revolve Group go up and down completely randomly.
Pair Corralation between Lithia Motors and Revolve Group
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.66 times more return on investment than Revolve Group. However, Lithia Motors is 1.52 times less risky than Revolve Group. It trades about 0.06 of its potential returns per unit of risk. Revolve Group LLC is currently generating about 0.03 per unit of risk. If you would invest 22,348 in Lithia Motors on August 27, 2024 and sell it today you would earn a total of 16,738 from holding Lithia Motors or generate 74.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. Revolve Group LLC
Performance |
| Timeline |
| Lithia Motors |
| Revolve Group LLC |
Lithia Motors and Revolve Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Revolve Group
The main advantage of trading using opposite Lithia Motors and Revolve Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Revolve Group 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 Revolve Group will offset losses from the drop in Revolve Group'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 |
| Revolve Group vs. Sea | Revolve Group vs. MercadoLibre | Revolve Group vs. Jumia Technologies AG | Revolve Group vs. PDD 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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