Correlation Between Bridgestone Corp and LKQ
Can any of the company-specific risk be diversified away by investing in both Bridgestone Corp 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 Bridgestone Corp and LKQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bridgestone Corp ADR and LKQ Corporation, you can compare the effects of market volatilities on Bridgestone Corp 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 Bridgestone Corp with a short position of LKQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgestone Corp and LKQ.
Diversification Opportunities for Bridgestone Corp and LKQ
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bridgestone and LKQ is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bridgestone Corp ADR and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Bridgestone Corp 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 Bridgestone Corp ADR 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 Bridgestone Corp i.e., Bridgestone Corp and LKQ go up and down completely randomly.
Pair Corralation between Bridgestone Corp and LKQ
Assuming the 90 days horizon Bridgestone Corp ADR is expected to generate 0.77 times more return on investment than LKQ. However, Bridgestone Corp ADR is 1.3 times less risky than LKQ. It trades about 0.01 of its potential returns per unit of risk. LKQ Corporation is currently generating about -0.03 per unit of risk. If you would invest 1,737 in Bridgestone Corp ADR on August 29, 2024 and sell it today you would earn a total of 5.00 from holding Bridgestone Corp ADR or generate 0.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bridgestone Corp ADR vs. LKQ Corp.
Performance |
| Timeline |
| Bridgestone Corp ADR |
| LKQ Corporation |
Bridgestone Corp and LKQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bridgestone Corp and LKQ
The main advantage of trading using opposite Bridgestone Corp and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bridgestone Corp 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.| Bridgestone Corp vs. Continental AG PK | Bridgestone Corp vs. Compagnie Generale des | Bridgestone Corp vs. Denso Corp ADR | Bridgestone Corp vs. Subaru Corp ADR |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |