Correlation Between Monro Muffler and LKQ
Can any of the company-specific risk be diversified away by investing in both Monro Muffler 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 Monro Muffler and LKQ into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monro Muffler Brake and LKQ Corporation, you can compare the effects of market volatilities on Monro Muffler 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 Monro Muffler with a short position of LKQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monro Muffler and LKQ.
Diversification Opportunities for Monro Muffler and LKQ
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Monro and LKQ is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Monro Muffler Brake and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Monro Muffler 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 Monro Muffler Brake 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 Monro Muffler i.e., Monro Muffler and LKQ go up and down completely randomly.
Pair Corralation between Monro Muffler and LKQ
Given the investment horizon of 90 days Monro Muffler Brake is expected to generate 1.47 times more return on investment than LKQ. However, Monro Muffler is 1.47 times more volatile than LKQ Corporation. It trades about 0.0 of its potential returns per unit of risk. LKQ Corporation is currently generating about -0.02 per unit of risk. If you would invest 2,833 in Monro Muffler Brake on August 24, 2024 and sell it today you would lose (160.00) from holding Monro Muffler Brake or give up 5.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Monro Muffler Brake vs. LKQ Corp.
Performance |
| Timeline |
| Monro Muffler Brake |
| LKQ Corporation |
Monro Muffler and LKQ Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monro Muffler and LKQ
The main advantage of trading using opposite Monro Muffler and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monro Muffler 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.| Monro Muffler vs. Motorcar Parts of | Monro Muffler vs. Standard Motor Products | Monro Muffler vs. Stoneridge | Monro Muffler vs. Douglas Dynamics |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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