Correlation Between Lithia Motors and Inchcape Plc
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Inchcape Plc 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 Inchcape Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Inchcape plc, you can compare the effects of market volatilities on Lithia Motors and Inchcape Plc 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 Inchcape Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Inchcape Plc.
Diversification Opportunities for Lithia Motors and Inchcape Plc
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lithia and Inchcape is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Inchcape plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inchcape plc 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 Inchcape Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inchcape plc has no effect on the direction of Lithia Motors i.e., Lithia Motors and Inchcape Plc go up and down completely randomly.
Pair Corralation between Lithia Motors and Inchcape Plc
Assuming the 90 days horizon Lithia Motors is expected to generate 1.15 times more return on investment than Inchcape Plc. However, Lithia Motors is 1.15 times more volatile than Inchcape plc. It trades about 0.06 of its potential returns per unit of risk. Inchcape plc is currently generating about 0.02 per unit of risk. If you would invest 18,889 in Lithia Motors on September 24, 2024 and sell it today you would earn a total of 15,711 from holding Lithia Motors or generate 83.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. Inchcape plc
Performance |
| Timeline |
| Lithia Motors |
| Inchcape plc |
Lithia Motors and Inchcape Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and Inchcape Plc
The main advantage of trading using opposite Lithia Motors and Inchcape Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Inchcape Plc 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 Inchcape Plc will offset losses from the drop in Inchcape Plc'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 |
| Inchcape Plc vs. Copart Inc | Inchcape Plc vs. Zhongsheng Group Holdings | Inchcape Plc vs. CarMax Inc | Inchcape Plc vs. DIeteren Group SA |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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