Correlation Between DENSO P and LKQ
Can any of the company-specific risk be diversified away by investing in both DENSO P 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 DENSO P and LKQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DENSO P ADR and LKQ Corporation, you can compare the effects of market volatilities on DENSO P 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 DENSO P with a short position of LKQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENSO P and LKQ.
Diversification Opportunities for DENSO P and LKQ
Very weak diversification
The 3 months correlation between DENSO and LKQ is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding DENSO P ADR and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and DENSO P 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 DENSO P 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 DENSO P i.e., DENSO P and LKQ go up and down completely randomly.
Pair Corralation between DENSO P and LKQ
Assuming the 90 days trading horizon DENSO P ADR is expected to generate 1.26 times more return on investment than LKQ. However, DENSO P is 1.26 times more volatile than LKQ Corporation. It trades about 0.02 of its potential returns per unit of risk. LKQ Corporation is currently generating about -0.03 per unit of risk. If you would invest 1,073 in DENSO P ADR on September 23, 2024 and sell it today you would earn a total of 157.00 from holding DENSO P ADR or generate 14.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DENSO P ADR vs. LKQ Corp.
Performance |
| Timeline |
| DENSO P ADR |
| LKQ Corporation |
DENSO P and LKQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DENSO P and LKQ
The main advantage of trading using opposite DENSO P and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DENSO P 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.| DENSO P vs. Dno ASA | DENSO P vs. Aptiv PLC | DENSO P vs. PT Astra International | DENSO P vs. Magna International |
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 CEOs Directory module to screen CEOs from public companies around the world.
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