Correlation Between Tower Semiconductor and Lithia Motors
Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor 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 Tower Semiconductor and Lithia Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tower Semiconductor and Lithia Motors, you can compare the effects of market volatilities on Tower Semiconductor 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 Tower Semiconductor with a short position of Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and Lithia Motors.
Diversification Opportunities for Tower Semiconductor and Lithia Motors
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Tower and Lithia is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and Tower Semiconductor 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 Tower Semiconductor 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 Tower Semiconductor i.e., Tower Semiconductor and Lithia Motors go up and down completely randomly.
Pair Corralation between Tower Semiconductor and Lithia Motors
Given the investment horizon of 90 days Tower Semiconductor is expected to generate 0.97 times more return on investment than Lithia Motors. However, Tower Semiconductor is 1.04 times less risky than Lithia Motors. It trades about 0.23 of its potential returns per unit of risk. Lithia Motors is currently generating about -0.06 per unit of risk. If you would invest 5,086 in Tower Semiconductor on October 24, 2024 and sell it today you would earn a total of 290.00 from holding Tower Semiconductor or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tower Semiconductor vs. Lithia Motors
Performance |
| Timeline |
| Tower Semiconductor |
| Lithia Motors |
Tower Semiconductor and Lithia Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tower Semiconductor and Lithia Motors
The main advantage of trading using opposite Tower Semiconductor and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tower Semiconductor 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.| Tower Semiconductor vs. Nova | Tower Semiconductor vs. AudioCodes | Tower Semiconductor vs. Nice Ltd ADR | Tower Semiconductor vs. Elbit Systems |
| 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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