Correlation Between SIMON and Lithia Motors

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

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

Diversification Opportunities for SIMON and Lithia Motors

0.0

Correlation Coefficient

SIMON  Lithia Motors

Pay attention - limited upside

The 3 months correlation between SIMON and Lithia is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding SIMON PPTY GROUP and Lithia Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithia Motors and SIMON 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 SIMON PPTY GROUP 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 SIMON i.e., SIMON and Lithia Motors go up and down completely randomly.

Pair Corralation between SIMON and Lithia Motors

If you would invest  0.00  in SIMON PPTY GROUP on October 9, 2024 and sell it today you would earn a total of  0.00  from holding SIMON PPTY GROUP or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

SIMON PPTY GROUP  vs.  Lithia Motors

SIMON PPTY GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite SIMON and Lithia Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SIMON 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 SIMON PPTY GROUP 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.