Correlation Between Lithia Motors and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Dow Jones Industrial, you can compare the effects of market volatilities on Lithia Motors and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Dow Jones.
Diversification Opportunities for Lithia Motors and Dow Jones
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lithia and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Lithia Motors i.e., Lithia Motors and Dow Jones go up and down completely randomly.
Pair Corralation between Lithia Motors and Dow Jones
Assuming the 90 days horizon Lithia Motors is expected to generate 2.3 times more return on investment than Dow Jones. However, Lithia Motors is 2.3 times more volatile than Dow Jones Industrial. It trades about 0.37 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.37 per unit of risk. If you would invest 30,952 in Lithia Motors on September 5, 2024 and sell it today you would earn a total of 5,848 from holding Lithia Motors or generate 18.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lithia Motors vs. Dow Jones Industrial
Performance |
| Timeline |
Lithia Motors and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Lithia Motors
Pair trading matchups for Lithia Motors
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Lithia Motors and Dow Jones
The main advantage of trading using opposite Lithia Motors and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Lithia Motors vs. Ebro Foods SA | Lithia Motors vs. MAVEN WIRELESS SWEDEN | Lithia Motors vs. NISSIN FOODS HLDGS | Lithia Motors vs. COFCO Joycome Foods |
| Dow Jones vs. Shake Shack | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. Dave Busters Entertainment | Dow Jones vs. Meli Hotels International |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |