Correlation Between Boqii Holding and Lithia Motors

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

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

Diversification Opportunities for Boqii Holding and Lithia Motors

-0.34

Correlation Coefficient

Boqii Holding  Lithia Motors

Very good diversification

The 3 months correlation between Boqii and Lithia is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Boqii Holding Limited and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and Boqii Holding 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 Boqii Holding Limited 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 Boqii Holding i.e., Boqii Holding and Lithia Motors go up and down completely randomly.

Pair Corralation between Boqii Holding and Lithia Motors

Allowing for the 90-day total investment horizon Boqii Holding Limited is expected to under-perform the Lithia Motors. In addition to that, Boqii Holding is 3.47 times more volatile than Lithia Motors. It trades about -0.46 of its total potential returns per unit of risk. Lithia Motors is currently generating about -0.32 per unit of volatility. If you would invest  39,427  in Lithia Motors on September 26, 2024 and sell it today you would lose (3,022) from holding Lithia Motors or give up 7.66% of portfolio value over 90 days.

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

Boqii Holding Limited  vs.  Lithia Motors

Boqii Holding Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boqii Holding Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Lithia Motors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lithia Motors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Lithia Motors exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boqii Holding and Lithia Motors

The main advantage of trading using opposite Boqii Holding and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boqii Holding 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 Boqii Holding Limited 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..