Correlation Between Lithia Motors and Nabors Energy

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

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

Diversification Opportunities for Lithia Motors and Nabors Energy

-0.51

Correlation Coefficient

Lithia Motors  Nabors Energy

Excellent diversification

The 3 months correlation between Lithia and Nabors is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Lithia Motors and Nabors Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Energy Transition 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 Nabors Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Energy Transition has no effect on the direction of Lithia Motors i.e., Lithia Motors and Nabors Energy go up and down completely randomly.

Pair Corralation between Lithia Motors and Nabors Energy

Considering the 90-day investment horizon Lithia Motors is expected to generate 6.33 times more return on investment than Nabors Energy. However, Lithia Motors is 6.33 times more volatile than Nabors Energy Transition. It trades about 0.04 of its potential returns per unit of risk. Nabors Energy Transition is currently generating about 0.07 per unit of risk. If you would invest  31,529  in Lithia Motors on May 26, 2025 and sell it today you would earn a total of  1,144  from holding Lithia Motors or generate 3.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Lithia Motors  vs.  Nabors Energy Transition

Lithia Motors

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lithia Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lithia Motors is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Nabors Energy Transition

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Nabors Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lithia Motors and Nabors Energy

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

The idea behind Lithia Motors and Nabors Energy Transition 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.