Correlation Between Service Properties and Lithia Motors
Can any of the company-specific risk be diversified away by investing in both Service Properties and Lithia Motors 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 Service Properties and Lithia Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Service Properties Trust and Lithia Motors, you can compare the effects of market volatilities on Service Properties and Lithia Motors 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 Service Properties with a short position of Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Service Properties and Lithia Motors.
Diversification Opportunities for Service Properties and Lithia Motors
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Service and Lithia is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Service Properties Trust and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and Service Properties 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 Service Properties Trust are associated (or correlated) with Lithia Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithia Motors has no effect on the direction of Service Properties i.e., Service Properties and Lithia Motors go up and down completely randomly.
Pair Corralation between Service Properties and Lithia Motors
Considering the 90-day investment horizon Service Properties Trust is expected to generate 1.42 times more return on investment than Lithia Motors. However, Service Properties is 1.42 times more volatile than Lithia Motors. It trades about 0.19 of its potential returns per unit of risk. Lithia Motors is currently generating about -0.06 per unit of risk. If you would invest 244.00 in Service Properties Trust on October 24, 2024 and sell it today you would earn a total of 16.00 from holding Service Properties Trust or generate 6.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Service Properties Trust vs. Lithia Motors
Performance |
| Timeline |
| Service Properties Trust |
| Lithia Motors |
Service Properties and Lithia Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Service Properties and Lithia Motors
The main advantage of trading using opposite Service Properties and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Service Properties position performs unexpectedly, Lithia Motors 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 Lithia Motors will offset losses from the drop in Lithia Motors' long position.| Service Properties vs. Lithia Motors | Service Properties vs. Summit Therapeutics PLC | Service Properties vs. Simon Property Group | Service Properties vs. Teleflex Incorporated |
| Lithia Motors vs. Sonic Automotive | Lithia Motors vs. AutoNation | Lithia Motors vs. Asbury Automotive Group | Lithia Motors 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 Stocks Directory module to find actively traded stocks across global markets.
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