Correlation Between LKQ and Chijet
Can any of the company-specific risk be diversified away by investing in both LKQ and Chijet 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 LKQ and Chijet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LKQ Corporation and Chijet Motor Company,, you can compare the effects of market volatilities on LKQ and Chijet 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 LKQ with a short position of Chijet. Check out your portfolio center. Please also check ongoing floating volatility patterns of LKQ and Chijet.
Diversification Opportunities for LKQ and Chijet
Poor diversification
The 3 months correlation between LKQ and Chijet is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Chijet Motor Company, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chijet Motor , and LKQ 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 LKQ Corporation are associated (or correlated) with Chijet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chijet Motor , has no effect on the direction of LKQ i.e., LKQ and Chijet go up and down completely randomly.
Pair Corralation between LKQ and Chijet
Considering the 90-day investment horizon LKQ Corporation is expected to generate 0.17 times more return on investment than Chijet. However, LKQ Corporation is 5.88 times less risky than Chijet. It trades about -0.04 of its potential returns per unit of risk. Chijet Motor Company, is currently generating about -0.07 per unit of risk. If you would invest 5,185 in LKQ Corporation on August 31, 2024 and sell it today you would lose (1,256) from holding LKQ Corporation or give up 24.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LKQ Corp. vs. Chijet Motor Company,
Performance |
| Timeline |
| LKQ Corporation |
| Chijet Motor , |
LKQ and Chijet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LKQ and Chijet
The main advantage of trading using opposite LKQ and Chijet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LKQ position performs unexpectedly, Chijet 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 Chijet will offset losses from the drop in Chijet's long position.The idea behind LKQ Corporation and Chijet Motor Company, 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.| Chijet vs. Playstudios | Chijet vs. Nike Inc | Chijet vs. Playtika Holding Corp | Chijet vs. FitLife Brands, Common |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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