Correlation Between Lithia Motors and Townsquare Media
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Townsquare Media 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 Townsquare Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Townsquare Media, you can compare the effects of market volatilities on Lithia Motors and Townsquare Media 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 Townsquare Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Townsquare Media.
Diversification Opportunities for Lithia Motors and Townsquare Media
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lithia and Townsquare is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media 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 Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of Lithia Motors i.e., Lithia Motors and Townsquare Media go up and down completely randomly.
Pair Corralation between Lithia Motors and Townsquare Media
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.88 times more return on investment than Townsquare Media. However, Lithia Motors is 1.14 times less risky than Townsquare Media. It trades about 0.05 of its potential returns per unit of risk. Townsquare Media is currently generating about 0.04 per unit of risk. If you would invest 24,497 in Lithia Motors on November 9, 2024 and sell it today you would earn a total of 13,692 from holding Lithia Motors or generate 55.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. Townsquare Media
Performance |
| Timeline |
| Lithia Motors |
| Townsquare Media |
Lithia Motors and Townsquare Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Townsquare Media
The main advantage of trading using opposite Lithia Motors and Townsquare Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Townsquare Media 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 Townsquare Media will offset losses from the drop in Townsquare Media's long position.| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors vs. Penske Automotive Group |
| Townsquare Media vs. Mirriad Advertising plc | Townsquare Media vs. INEO Tech Corp | Townsquare Media vs. Kidoz Inc | Townsquare Media vs. Marchex |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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