Correlation Between Lithia Motors and Kingsway Financial

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

By analyzing existing cross correlation between Lithia Motors and Kingsway Financial Services, you can compare the effects of market volatilities on Lithia Motors and Kingsway Financial 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 Kingsway Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Kingsway Financial.

Diversification Opportunities for Lithia Motors and Kingsway Financial

0.0

Correlation Coefficient

Lithia Motors  Kingsway Financial

Pay attention - limited upside

The 3 months correlation between Lithia and Kingsway is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Kingsway Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsway Financial 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 Kingsway Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsway Financial has no effect on the direction of Lithia Motors i.e., Lithia Motors and Kingsway Financial go up and down completely randomly.

Pair Corralation between Lithia Motors and Kingsway Financial

If you would invest (100.00) in Kingsway Financial Services on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Kingsway Financial Services or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lithia Motors  vs.  Kingsway Financial Services

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.

Kingsway Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingsway Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kingsway Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lithia Motors and Kingsway Financial

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

The idea behind Lithia Motors and Kingsway Financial Services 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.