Correlation Between LKQ and Magna International
Can any of the company-specific risk be diversified away by investing in both LKQ and Magna International 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 Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LKQ Corporation and Magna International, you can compare the effects of market volatilities on LKQ and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of LKQ and Magna International.
Diversification Opportunities for LKQ and Magna International
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between LKQ and Magna is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of LKQ i.e., LKQ and Magna International go up and down completely randomly.
Pair Corralation between LKQ and Magna International
Assuming the 90 days trading horizon LKQ Corporation is expected to generate 1.33 times more return on investment than Magna International. However, LKQ is 1.33 times more volatile than Magna International. It trades about -0.15 of its potential returns per unit of risk. Magna International is currently generating about -0.31 per unit of risk. If you would invest 3,660 in LKQ Corporation on October 11, 2024 and sell it today you would lose (180.00) from holding LKQ Corporation or give up 4.92% 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. Magna International
Performance |
| Timeline |
| LKQ Corporation |
| Magna International |
LKQ and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LKQ and Magna International
The main advantage of trading using opposite LKQ and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LKQ position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| LKQ vs. MCEWEN MINING INC | LKQ vs. DEVRY EDUCATION GRP | LKQ vs. Forsys Metals Corp | LKQ vs. Nordic Semiconductor ASA |
| Magna International vs. T MOBILE US | Magna International vs. AOYAMA TRADING | Magna International vs. FIH MOBILE | Magna International vs. Highlight Communications AG |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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