Correlation Between Magna International and LKQ
Can any of the company-specific risk be diversified away by investing in both Magna International 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 Magna International and LKQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and LKQ Corporation, you can compare the effects of market volatilities on Magna International 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 Magna International with a short position of LKQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and LKQ.
Diversification Opportunities for Magna International and LKQ
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Magna and LKQ is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Magna International 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 Magna International 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 Magna International i.e., Magna International and LKQ go up and down completely randomly.
Pair Corralation between Magna International and LKQ
Assuming the 90 days horizon Magna International is expected to generate 1.49 times more return on investment than LKQ. However, Magna International is 1.49 times more volatile than LKQ Corporation. It trades about 0.09 of its potential returns per unit of risk. LKQ Corporation is currently generating about 0.01 per unit of risk. If you would invest 3,745 in Magna International on September 2, 2024 and sell it today you would earn a total of 475.00 from holding Magna International or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. LKQ Corp.
Performance |
| Timeline |
| Magna International |
| LKQ Corporation |
Magna International and LKQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and LKQ
The main advantage of trading using opposite Magna International and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International 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.| Magna International vs. PT Astra International | Magna International vs. Superior Plus Corp | Magna International vs. NMI Holdings | Magna International vs. Origin Agritech |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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