Correlation Between Lithia Motors and 26442EAG5

Can any of the company-specific risk be diversified away by investing in both Lithia Motors and 26442EAG5 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 26442EAG5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lithia Motors and DUKE ENERGY OHIO, you can compare the effects of market volatilities on Lithia Motors and 26442EAG5 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 26442EAG5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lithia Motors and 26442EAG5.

Diversification Opportunities for Lithia Motors and 26442EAG5

-0.17

Correlation Coefficient

Lithia Motors  26442EAG5

Good diversification

The 3 months correlation between Lithia and 26442EAG5 is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and DUKE ENERGY OHIO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUKE ENERGY OHIO 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 26442EAG5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUKE ENERGY OHIO has no effect on the direction of Lithia Motors i.e., Lithia Motors and 26442EAG5 go up and down completely randomly.

Pair Corralation between Lithia Motors and 26442EAG5

Considering the 90-day investment horizon Lithia Motors is expected to under-perform the 26442EAG5. In addition to that, Lithia Motors is 1.45 times more volatile than DUKE ENERGY OHIO. It trades about -0.1 of its total potential returns per unit of risk. DUKE ENERGY OHIO is currently generating about 0.16 per unit of volatility. If you would invest  7,976  in DUKE ENERGY OHIO on December 24, 2024 and sell it today you would earn a total of  772.00  from holding DUKE ENERGY OHIO or generate 9.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.49%
Values	Daily Returns

Lithia Motors  vs.  DUKE ENERGY OHIO

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 latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

DUKE ENERGY OHIO

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DUKE ENERGY OHIO are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, 26442EAG5 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lithia Motors and 26442EAG5

The main advantage of trading using opposite Lithia Motors and 26442EAG5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lithia Motors position performs unexpectedly, 26442EAG5 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 26442EAG5 will offset losses from the drop in 26442EAG5's long position.

The idea behind Lithia Motors and DUKE ENERGY OHIO 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.