Correlation Between Lithia Motors and DIeteren Group
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and DIeteren 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 DIeteren 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 DIeteren Group SA, you can compare the effects of market volatilities on Lithia Motors and DIeteren 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 DIeteren Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and DIeteren Group.
Diversification Opportunities for Lithia Motors and DIeteren Group
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lithia and DIeteren is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and DIeteren Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIeteren Group SA 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 DIeteren Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIeteren Group SA has no effect on the direction of Lithia Motors i.e., Lithia Motors and DIeteren Group go up and down completely randomly.
Pair Corralation between Lithia Motors and DIeteren Group
Assuming the 90 days horizon Lithia Motors is expected to under-perform the DIeteren Group. But the stock apears to be less risky and, when comparing its historical volatility, Lithia Motors is 4.78 times less risky than DIeteren Group. The stock trades about -0.38 of its potential returns per unit of risk. The DIeteren Group SA is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 13,247 in DIeteren Group SA on September 24, 2024 and sell it today you would earn a total of 2,993 from holding DIeteren Group SA or generate 22.59% 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. DIeteren Group SA
Performance |
| Timeline |
| Lithia Motors |
| DIeteren Group SA |
Lithia Motors and DIeteren Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and DIeteren Group
The main advantage of trading using opposite Lithia Motors and DIeteren Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, DIeteren 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 DIeteren Group will offset losses from the drop in DIeteren Group's long position.| Lithia Motors vs. Copart Inc | Lithia Motors vs. Zhongsheng Group Holdings | Lithia Motors vs. CarMax Inc | Lithia Motors vs. DIeteren Group SA |
| DIeteren Group vs. Copart Inc | DIeteren Group vs. Zhongsheng Group Holdings | DIeteren Group vs. CarMax Inc | DIeteren Group vs. Penske Automotive Group |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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