Correlation Between Strategic Investments and LKQ
Can any of the company-specific risk be diversified away by investing in both Strategic Investments 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 Strategic Investments and LKQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Investments AS and LKQ Corporation, you can compare the effects of market volatilities on Strategic Investments 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 Strategic Investments with a short position of LKQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Investments and LKQ.
Diversification Opportunities for Strategic Investments and LKQ
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Strategic and LKQ is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Strategic Investments 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 Strategic Investments AS 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 Strategic Investments i.e., Strategic Investments and LKQ go up and down completely randomly.
Pair Corralation between Strategic Investments and LKQ
Assuming the 90 days horizon Strategic Investments AS is expected to generate 2.09 times more return on investment than LKQ. However, Strategic Investments is 2.09 times more volatile than LKQ Corporation. It trades about 0.01 of its potential returns per unit of risk. LKQ Corporation is currently generating about -0.01 per unit of risk. If you would invest 15.00 in Strategic Investments AS on September 3, 2024 and sell it today you would lose (1.00) from holding Strategic Investments AS or give up 6.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Investments AS vs. LKQ Corp.
Performance |
| Timeline |
| Strategic Investments |
| LKQ Corporation |
Strategic Investments and LKQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Investments and LKQ
The main advantage of trading using opposite Strategic Investments and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Investments 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.| Strategic Investments vs. Japan Tobacco | Strategic Investments vs. MAROC TELECOM | Strategic Investments vs. REGAL HOTEL INTL | Strategic Investments vs. Host Hotels Resorts |
| LKQ vs. Mobilezone Holding AG | LKQ vs. ITALIAN WINE BRANDS | LKQ vs. OFFICE DEPOT | LKQ vs. MCEWEN MINING INC |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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