Correlation Between Allego and LKQ
Can any of the company-specific risk be diversified away by investing in both Allego and LKQ 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 Allego and LKQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allego Inc and LKQ Corporation, you can compare the effects of market volatilities on Allego and LKQ 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 Allego with a short position of LKQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allego and LKQ.
Diversification Opportunities for Allego and LKQ
Very good diversification
The 3 months correlation between Allego and LKQ is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Allego Inc and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Allego 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 Allego Inc are associated (or correlated) with LKQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LKQ Corporation has no effect on the direction of Allego i.e., Allego and LKQ go up and down completely randomly.
Pair Corralation between Allego and LKQ
Given the investment horizon of 90 days Allego Inc is expected to generate 10.55 times more return on investment than LKQ. However, Allego is 10.55 times more volatile than LKQ Corporation. It trades about 0.06 of its potential returns per unit of risk. LKQ Corporation is currently generating about -0.1 per unit of risk. If you would invest 192.00 in Allego Inc on August 26, 2024 and sell it today you would lose (1.00) from holding Allego Inc or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 69.23% |
| Values | Daily Returns |
Allego Inc vs. LKQ Corp.
Performance |
| Timeline |
| Allego Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| LKQ Corporation |
Allego and LKQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allego and LKQ
The main advantage of trading using opposite Allego and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allego position performs unexpectedly, LKQ 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 LKQ will offset losses from the drop in LKQ's long position.The idea behind Allego Inc and LKQ Corporation 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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