Correlation Between Lithia Motors and USS
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and USS 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 USS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and USS Co, you can compare the effects of market volatilities on Lithia Motors and USS 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 USS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and USS.
Diversification Opportunities for Lithia Motors and USS
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lithia and USS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and USS Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USS Co 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 USS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USS Co has no effect on the direction of Lithia Motors i.e., Lithia Motors and USS go up and down completely randomly.
Pair Corralation between Lithia Motors and USS
Assuming the 90 days horizon Lithia Motors is expected to under-perform the USS. In addition to that, Lithia Motors is 1.1 times more volatile than USS Co. It trades about -0.38 of its total potential returns per unit of risk. USS Co is currently generating about -0.16 per unit of volatility. If you would invest 860.00 in USS Co on September 24, 2024 and sell it today you would lose (25.00) from holding USS Co or give up 2.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lithia Motors vs. USS Co
Performance |
| Timeline |
| Lithia Motors |
| USS Co |
Lithia Motors and USS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lithia Motors and USS
The main advantage of trading using opposite Lithia Motors and USS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, USS 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 USS will offset losses from the drop in USS'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 |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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