Correlation Between Lithia Motors and Shift Technologies
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Shift Technologies 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 Shift Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Shift Technologies, you can compare the effects of market volatilities on Lithia Motors and Shift Technologies 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 Shift Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Shift Technologies.
Diversification Opportunities for Lithia Motors and Shift Technologies
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lithia and Shift is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Shift Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shift Technologies 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 Shift Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shift Technologies has no effect on the direction of Lithia Motors i.e., Lithia Motors and Shift Technologies go up and down completely randomly.
Pair Corralation between Lithia Motors and Shift Technologies
Considering the 90-day investment horizon Lithia Motors is expected to generate 3.89 times less return on investment than Shift Technologies. But when comparing it to its historical volatility, Lithia Motors is 2.53 times less risky than Shift Technologies. It trades about 0.06 of its potential returns per unit of risk. Shift Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 190.00 in Shift Technologies on August 31, 2024 and sell it today you would earn a total of 23.00 from holding Shift Technologies or generate 12.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 8.29% |
| Values | Daily Returns |
Lithia Motors vs. Shift Technologies
Performance |
| Timeline |
| Lithia Motors |
| Shift Technologies |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Lithia Motors and Shift Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Shift Technologies
The main advantage of trading using opposite Lithia Motors and Shift Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Shift Technologies 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 Shift Technologies will offset losses from the drop in Shift Technologies' long position.| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors vs. Penske Automotive Group |
| Shift Technologies vs. Carvana Co | Shift Technologies vs. CarMax Inc | Shift Technologies vs. U Power Limited | Shift Technologies 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |