Correlation Between Lithia Motors and MARRIOTT

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

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

Diversification Opportunities for Lithia Motors and MARRIOTT

0.45

Correlation Coefficient

Lithia Motors  MARRIOTT

Very weak diversification

The 3 months correlation between Lithia and MARRIOTT is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and MARRIOTT OWNERSHIP RESORTS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MARRIOTT OWNERSHIP 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 MARRIOTT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MARRIOTT OWNERSHIP has no effect on the direction of Lithia Motors i.e., Lithia Motors and MARRIOTT go up and down completely randomly.

Pair Corralation between Lithia Motors and MARRIOTT

Considering the 90-day investment horizon Lithia Motors is expected to under-perform the MARRIOTT. In addition to that, Lithia Motors is 1.19 times more volatile than MARRIOTT OWNERSHIP RESORTS. It trades about -0.12 of its total potential returns per unit of risk. MARRIOTT OWNERSHIP RESORTS is currently generating about -0.02 per unit of volatility. If you would invest  9,572  in MARRIOTT OWNERSHIP RESORTS on December 23, 2024 and sell it today you would lose (251.00) from holding MARRIOTT OWNERSHIP RESORTS or give up 2.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Lithia Motors  vs.  MARRIOTT OWNERSHIP RESORTS

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.

MARRIOTT OWNERSHIP

Risk-Adjusted Performance

Very Weak

Over the last 90 days MARRIOTT OWNERSHIP RESORTS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MARRIOTT is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lithia Motors and MARRIOTT

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

The idea behind Lithia Motors and MARRIOTT OWNERSHIP RESORTS 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.