Correlation Between Lithia Motors and MOVIE GAMES

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

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

Diversification Opportunities for Lithia Motors and MOVIE GAMES

0.01

Correlation Coefficient

Lithia Motors  MOVIE GAMES

Significant diversification

The 3 months correlation between Lithia and MOVIE is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and MOVIE GAMES SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOVIE GAMES SA 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 MOVIE GAMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOVIE GAMES SA has no effect on the direction of Lithia Motors i.e., Lithia Motors and MOVIE GAMES go up and down completely randomly.

Pair Corralation between Lithia Motors and MOVIE GAMES

Assuming the 90 days horizon Lithia Motors is expected to under-perform the MOVIE GAMES. But the stock apears to be less risky and, when comparing its historical volatility, Lithia Motors is 1.78 times less risky than MOVIE GAMES. The stock trades about -0.15 of its potential returns per unit of risk. The MOVIE GAMES SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  297.00  in MOVIE GAMES SA on December 20, 2024 and sell it today you would earn a total of  107.00  from holding MOVIE GAMES SA or generate 36.03% return on investment over 90 days.

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

Lithia Motors  vs.  MOVIE GAMES SA

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

MOVIE GAMES SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MOVIE GAMES SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MOVIE GAMES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lithia Motors and MOVIE GAMES

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

The idea behind Lithia Motors and MOVIE GAMES SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .