Correlation Between SIVERS SEMICONDUCTORS and Lithia Motors

Can any of the company-specific risk be diversified away by investing in both SIVERS SEMICONDUCTORS 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 SIVERS SEMICONDUCTORS and Lithia Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SIVERS SEMICONDUCTORS AB and Lithia Motors, you can compare the effects of market volatilities on SIVERS SEMICONDUCTORS 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 SIVERS SEMICONDUCTORS with a short position of Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of SIVERS SEMICONDUCTORS and Lithia Motors.

Diversification Opportunities for SIVERS SEMICONDUCTORS and Lithia Motors

-0.26

Correlation Coefficient

SIVERS SEMICONDUCTORS  Lithia Motors

Very good diversification

The 3 months correlation between SIVERS and Lithia is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding SIVERS SEMICONDUCTORS AB and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and SIVERS SEMICONDUCTORS 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 SIVERS SEMICONDUCTORS AB 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 SIVERS SEMICONDUCTORS i.e., SIVERS SEMICONDUCTORS and Lithia Motors go up and down completely randomly.

Pair Corralation between SIVERS SEMICONDUCTORS and Lithia Motors

Assuming the 90 days horizon SIVERS SEMICONDUCTORS AB is expected to generate 5.0 times more return on investment than Lithia Motors. However, SIVERS SEMICONDUCTORS is 5.0 times more volatile than Lithia Motors. It trades about 0.21 of its potential returns per unit of risk. Lithia Motors is currently generating about -0.1 per unit of risk. If you would invest  19.00  in SIVERS SEMICONDUCTORS AB on December 4, 2024 and sell it today you would earn a total of  24.00  from holding SIVERS SEMICONDUCTORS AB or generate 126.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SIVERS SEMICONDUCTORS AB  vs.  Lithia Motors

SIVERS SEMICONDUCTORS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SIVERS SEMICONDUCTORS AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SIVERS SEMICONDUCTORS reported solid returns over the last few months and may actually be approaching a breakup point.

Lithia Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lithia Motors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SIVERS SEMICONDUCTORS and Lithia Motors

The main advantage of trading using opposite SIVERS SEMICONDUCTORS and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIVERS SEMICONDUCTORS 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.

The idea behind SIVERS SEMICONDUCTORS AB and Lithia Motors pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.