Correlation Between 26442CBJ2 and Lithia Motors

Can any of the company-specific risk be diversified away by investing in both 26442CBJ2 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 26442CBJ2 and Lithia Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DUK 495 15 JAN 33 and Lithia Motors, you can compare the effects of market volatilities on 26442CBJ2 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 26442CBJ2 with a short position of Lithia Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of 26442CBJ2 and Lithia Motors.

Diversification Opportunities for 26442CBJ2 and Lithia Motors

-0.03

Correlation Coefficient

26442CBJ2  Lithia Motors

Good diversification

The 3 months correlation between 26442CBJ2 and Lithia is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding DUK 495 15 JAN 33 and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and 26442CBJ2 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 DUK 495 15 JAN 33 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 26442CBJ2 i.e., 26442CBJ2 and Lithia Motors go up and down completely randomly.

Pair Corralation between 26442CBJ2 and Lithia Motors

Assuming the 90 days trading horizon DUK 495 15 JAN 33 is expected to generate 0.49 times more return on investment than Lithia Motors. However, DUK 495 15 JAN 33 is 2.05 times less risky than Lithia Motors. It trades about 0.1 of its potential returns per unit of risk. Lithia Motors is currently generating about -0.13 per unit of risk. If you would invest  9,822  in DUK 495 15 JAN 33 on December 24, 2024 and sell it today you would earn a total of  570.00  from holding DUK 495 15 JAN 33 or generate 5.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

DUK 495 15 JAN 33  vs.  Lithia Motors

DUK 495 15

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DUK 495 15 JAN 33 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 26442CBJ2 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with 26442CBJ2 and Lithia Motors

The main advantage of trading using opposite 26442CBJ2 and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 26442CBJ2 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 DUK 495 15 JAN 33 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.