Correlation Between Evgo and LKQ
Can any of the company-specific risk be diversified away by investing in both Evgo 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 Evgo and LKQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evgo Inc and LKQ Corporation, you can compare the effects of market volatilities on Evgo 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 Evgo with a short position of LKQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evgo and LKQ.
Diversification Opportunities for Evgo and LKQ
Pay attention - limited upside
The 3 months correlation between Evgo and LKQ is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Evgo Inc and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Evgo 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 Evgo 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 Evgo i.e., Evgo and LKQ go up and down completely randomly.
Pair Corralation between Evgo and LKQ
Given the investment horizon of 90 days Evgo Inc is expected to under-perform the LKQ. In addition to that, Evgo is 5.16 times more volatile than LKQ Corporation. It trades about -0.14 of its total potential returns per unit of risk. LKQ Corporation is currently generating about 0.04 per unit of volatility. If you would invest 3,749 in LKQ Corporation on August 24, 2024 and sell it today you would earn a total of 39.00 from holding LKQ Corporation or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evgo Inc vs. LKQ Corp.
Performance |
| Timeline |
| Evgo Inc |
| LKQ Corporation |
Evgo and LKQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evgo and LKQ
The main advantage of trading using opposite Evgo and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evgo 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 Evgo 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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