Correlation Between SAG Holdings and Lithia Motors

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

By analyzing existing cross correlation between SAG Holdings Limited and Lithia Motors, you can compare the effects of market volatilities on SAG Holdings and Lithia Motors 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 SAG Holdings with a short position of Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of SAG Holdings and Lithia Motors.

Diversification Opportunities for SAG Holdings and Lithia Motors

-0.25

Correlation Coefficient

SAG Holdings  Lithia Motors

Very good diversification

The 3 months correlation between SAG and Lithia is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding SAG Holdings Limited and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and SAG Holdings 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 SAG Holdings Limited are associated (or correlated) with Lithia Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithia Motors has no effect on the direction of SAG Holdings i.e., SAG Holdings and Lithia Motors go up and down completely randomly.

Pair Corralation between SAG Holdings and Lithia Motors

Considering the 90-day investment horizon SAG Holdings Limited is expected to generate 4.08 times more return on investment than Lithia Motors. However, SAG Holdings is 4.08 times more volatile than Lithia Motors. It trades about -0.02 of its potential returns per unit of risk. Lithia Motors is currently generating about -0.12 per unit of risk. If you would invest  275.00  in SAG Holdings Limited on October 24, 2024 and sell it today you would lose (15.16) from holding SAG Holdings Limited or give up 5.51% of portfolio value over 90 days.

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

SAG Holdings Limited  vs.  Lithia Motors

SAG Holdings Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SAG Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Lithia Motors

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lithia Motors are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Lithia Motors may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SAG Holdings and Lithia Motors

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

The idea behind SAG Holdings Limited and Lithia Motors 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 Global Correlations module to find global opportunities by holding instruments from different markets.