Correlation Between LKQ and Gentex
Can any of the company-specific risk be diversified away by investing in both LKQ and Gentex 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 Gentex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LKQ Corporation and Gentex, you can compare the effects of market volatilities on LKQ and Gentex 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 Gentex. Check out your portfolio center. Please also check ongoing floating volatility patterns of LKQ and Gentex.
Diversification Opportunities for LKQ and Gentex
Average diversification
The 3 months correlation between LKQ and Gentex is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of LKQ i.e., LKQ and Gentex go up and down completely randomly.
Pair Corralation between LKQ and Gentex
Considering the 90-day investment horizon LKQ Corporation is expected to under-perform the Gentex. In addition to that, LKQ is 1.19 times more volatile than Gentex. It trades about -0.03 of its total potential returns per unit of risk. Gentex is currently generating about 0.03 per unit of volatility. If you would invest 2,661 in Gentex on August 27, 2024 and sell it today you would earn a total of 379.00 from holding Gentex or generate 14.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LKQ Corp. vs. Gentex
Performance |
| Timeline |
| LKQ Corporation |
| Gentex |
LKQ and Gentex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LKQ and Gentex
The main advantage of trading using opposite LKQ and Gentex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LKQ position performs unexpectedly, Gentex 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 Gentex will offset losses from the drop in Gentex's long position.The idea behind LKQ Corporation and Gentex 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |