Correlation Between Lithia Motors and Macys
Can any of the company-specific risk be diversified away by investing in both Lithia Motors and Macys 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 Macys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lithia Motors and Macys Inc, you can compare the effects of market volatilities on Lithia Motors and Macys 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 Macys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and Macys.
Diversification Opportunities for Lithia Motors and Macys
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lithia and Macys is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc 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 Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Lithia Motors i.e., Lithia Motors and Macys go up and down completely randomly.
Pair Corralation between Lithia Motors and Macys
Considering the 90-day investment horizon Lithia Motors is expected to generate 0.81 times more return on investment than Macys. However, Lithia Motors is 1.24 times less risky than Macys. It trades about 0.14 of its potential returns per unit of risk. Macys Inc is currently generating about -0.01 per unit of risk. If you would invest 25,043 in Lithia Motors on September 25, 2024 and sell it today you would earn a total of 11,362 from holding Lithia Motors or generate 45.37% 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. Macys Inc
Performance |
Timeline |
Lithia Motors |
Macys Inc |
Lithia Motors and Macys Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lithia Motors and Macys
The main advantage of trading using opposite Lithia Motors and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, Macys 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 Macys will offset losses from the drop in Macys' long position.Lithia Motors vs. Macys Inc | Lithia Motors vs. Wayfair | Lithia Motors vs. 1StdibsCom | Lithia Motors vs. Boqii Holding Limited |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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