Correlation Between Lithia Motors and Fidus Investment

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

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

Diversification Opportunities for Lithia Motors and Fidus Investment

0.47

Correlation Coefficient

Lithia Motors  Fidus Investment

Very weak diversification

The 3 months correlation between Lithia and Fidus is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Fidus Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidus Investment Corp and Lithia Motors 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 Lithia Motors are associated (or correlated) with Fidus Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidus Investment Corp has no effect on the direction of Lithia Motors i.e., Lithia Motors and Fidus Investment go up and down completely randomly.

Pair Corralation between Lithia Motors and Fidus Investment

Considering the 90-day investment horizon Lithia Motors is expected to under-perform the Fidus Investment. In addition to that, Lithia Motors is 2.11 times more volatile than Fidus Investment Corp. It trades about -0.15 of its total potential returns per unit of risk. Fidus Investment Corp is currently generating about 0.08 per unit of volatility. If you would invest  2,028  in Fidus Investment Corp on December 19, 2024 and sell it today you would earn a total of  91.00  from holding Fidus Investment Corp or generate 4.49% return on investment over 90 days.

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

Lithia Motors  vs.  Fidus Investment Corp

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. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Fidus Investment Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fidus Investment is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lithia Motors and Fidus Investment

The main advantage of trading using opposite Lithia Motors and Fidus Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Fidus Investment 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 Fidus Investment will offset losses from the drop in Fidus Investment's long position.

The idea behind Lithia Motors and Fidus Investment Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.