Correlation Between BSANCI and Lithia Motors

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

By analyzing existing cross correlation between BSANCI 3177 26 OCT 31 and Lithia Motors, you can compare the effects of market volatilities on BSANCI 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 BSANCI with a short position of Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of BSANCI and Lithia Motors.

Diversification Opportunities for BSANCI and Lithia Motors

0.33

Correlation Coefficient

BSANCI  Lithia Motors

Weak diversification

The 3 months correlation between BSANCI and Lithia is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding BSANCI 3177 26 OCT 31 and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and BSANCI 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 BSANCI 3177 26 OCT 31 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 BSANCI i.e., BSANCI and Lithia Motors go up and down completely randomly.

Pair Corralation between BSANCI and Lithia Motors

Assuming the 90 days trading horizon BSANCI 3177 26 OCT 31 is expected to under-perform the Lithia Motors. But the bond apears to be less risky and, when comparing its historical volatility, BSANCI 3177 26 OCT 31 is 1.14 times less risky than Lithia Motors. The bond trades about -0.83 of its potential returns per unit of risk. The Lithia Motors is currently generating about -0.33 of returns per unit of risk over similar time horizon. If you would invest  37,687  in Lithia Motors on October 10, 2024 and sell it today you would lose (3,204) from holding Lithia Motors or give up 8.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	19.05%
Values	Daily Returns

BSANCI 3177 26 OCT 31  vs.  Lithia Motors

BSANCI 3177 26

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BSANCI 3177 26 OCT 31 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for BSANCI 3177 26 OCT 31 investors.

Lithia Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lithia Motors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Lithia Motors exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BSANCI and Lithia Motors

The main advantage of trading using opposite BSANCI and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BSANCI 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 BSANCI 3177 26 OCT 31 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.