Correlation Between 1StdibsCom and Lithia Motors
Can any of the company-specific risk be diversified away by investing in both 1StdibsCom 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 1StdibsCom and Lithia Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1StdibsCom and Lithia Motors, you can compare the effects of market volatilities on 1StdibsCom 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 1StdibsCom with a short position of Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1StdibsCom and Lithia Motors.
Diversification Opportunities for 1StdibsCom and Lithia Motors
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 1StdibsCom and Lithia is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding 1StdibsCom and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and 1StdibsCom 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 1StdibsCom 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 1StdibsCom i.e., 1StdibsCom and Lithia Motors go up and down completely randomly.
Pair Corralation between 1StdibsCom and Lithia Motors
Given the investment horizon of 90 days 1StdibsCom is expected to generate 2.65 times more return on investment than Lithia Motors. However, 1StdibsCom is 2.65 times more volatile than Lithia Motors. It trades about -0.02 of its potential returns per unit of risk. Lithia Motors is currently generating about -0.32 per unit of risk. If you would invest 386.00 in 1StdibsCom on September 26, 2024 and sell it today you would lose (9.00) from holding 1StdibsCom or give up 2.33% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
1StdibsCom vs. Lithia Motors
Performance |
Timeline |
1StdibsCom |
Lithia Motors |
1StdibsCom and Lithia Motors Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with 1StdibsCom and Lithia Motors
The main advantage of trading using opposite 1StdibsCom and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1StdibsCom 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.1StdibsCom vs. PDD Holdings | 1StdibsCom vs. Alibaba Group Holding | 1StdibsCom vs. Sea | 1StdibsCom vs. Wayfair |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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