Correlation Between Lithia Motors and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Tower Semiconductor 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 Tower Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Tower Semiconductor, you can compare the effects of market volatilities on Lithia Motors and Tower Semiconductor 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 Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Tower Semiconductor.
Diversification Opportunities for Lithia Motors and Tower Semiconductor
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Lithia and Tower is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of Lithia Motors i.e., Lithia Motors and Tower Semiconductor go up and down completely randomly.
Pair Corralation between Lithia Motors and Tower Semiconductor
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.42 times more return on investment than Tower Semiconductor. However, Lithia Motors is 2.4 times less risky than Tower Semiconductor. It trades about 0.23 of its potential returns per unit of risk. Tower Semiconductor is currently generating about -0.06 per unit of risk. If you would invest 34,795 in Lithia Motors on November 4, 2024 and sell it today you would earn a total of 2,815 from holding Lithia Motors or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. Tower Semiconductor
Performance |
| Timeline |
| Lithia Motors |
| Tower Semiconductor |
Lithia Motors and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Tower Semiconductor
The main advantage of trading using opposite Lithia Motors and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Tower Semiconductor 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 Tower Semiconductor will offset losses from the drop in Tower Semiconductor's long position.| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors vs. Penske Automotive Group |
| Tower Semiconductor vs. Nova | Tower Semiconductor vs. AudioCodes | Tower Semiconductor vs. Nice Ltd ADR | Tower Semiconductor vs. Elbit Systems |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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