Correlation Between Lithia Motors and IAC

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

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

Diversification Opportunities for Lithia Motors and IAC

0.45

Correlation Coefficient

Lithia Motors  IAC

Very weak diversification

The 3 months correlation between Lithia and IAC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and IAC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAC Inc 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 IAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAC Inc has no effect on the direction of Lithia Motors i.e., Lithia Motors and IAC go up and down completely randomly.

Pair Corralation between Lithia Motors and IAC

Considering the 90-day investment horizon Lithia Motors is expected to generate 66.31 times less return on investment than IAC. In addition to that, Lithia Motors is 1.05 times more volatile than IAC Inc. It trades about 0.0 of its total potential returns per unit of risk. IAC Inc is currently generating about 0.1 per unit of volatility. If you would invest  3,544  in IAC Inc on May 1, 2025 and sell it today you would earn a total of  401.00  from holding IAC Inc or generate 11.31% return on investment over 90 days.

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

Lithia Motors  vs.  IAC Inc

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 rather sound basic indicators, Lithia Motors is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

IAC Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IAC Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, IAC may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Lithia Motors and IAC

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

The idea behind Lithia Motors and IAC Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.