Correlation Between LKQ and Envirotech Vehicles
Can any of the company-specific risk be diversified away by investing in both LKQ and Envirotech Vehicles 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 Envirotech Vehicles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LKQ Corporation and Envirotech Vehicles, you can compare the effects of market volatilities on LKQ and Envirotech Vehicles 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 Envirotech Vehicles. Check out your portfolio center. Please also check ongoing floating volatility patterns of LKQ and Envirotech Vehicles.
Diversification Opportunities for LKQ and Envirotech Vehicles
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between LKQ and Envirotech is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Envirotech Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envirotech Vehicles 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 Envirotech Vehicles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envirotech Vehicles has no effect on the direction of LKQ i.e., LKQ and Envirotech Vehicles go up and down completely randomly.
Pair Corralation between LKQ and Envirotech Vehicles
Considering the 90-day investment horizon LKQ Corporation is expected to under-perform the Envirotech Vehicles. But the stock apears to be less risky and, when comparing its historical volatility, LKQ Corporation is 4.07 times less risky than Envirotech Vehicles. The stock trades about -0.04 of its potential returns per unit of risk. The Envirotech Vehicles is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 212.00 in Envirotech Vehicles on August 31, 2024 and sell it today you would lose (58.00) from holding Envirotech Vehicles or give up 27.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LKQ Corp. vs. Envirotech Vehicles
Performance |
| Timeline |
| LKQ Corporation |
| Envirotech Vehicles |
LKQ and Envirotech Vehicles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LKQ and Envirotech Vehicles
The main advantage of trading using opposite LKQ and Envirotech Vehicles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LKQ position performs unexpectedly, Envirotech Vehicles 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 Envirotech Vehicles will offset losses from the drop in Envirotech Vehicles' long position.The idea behind LKQ Corporation and Envirotech Vehicles 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.| Envirotech Vehicles vs. Vicinity Motor Corp | Envirotech Vehicles vs. Phoenix Motor Common | Envirotech Vehicles vs. China Xuefeng Environmental | Envirotech Vehicles vs. Volcon 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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