Correlation Between Continental Aktiengesellscha and LKQ

Can any of the company-specific risk be diversified away by investing in both Continental Aktiengesellscha 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 Continental Aktiengesellscha and LKQ into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Continental Aktiengesellschaft and LKQ Corporation, you can compare the effects of market volatilities on Continental Aktiengesellscha 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 Continental Aktiengesellscha with a short position of LKQ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental Aktiengesellscha and LKQ.

Diversification Opportunities for Continental Aktiengesellscha and LKQ

0.58

Correlation Coefficient

Continental Aktiengesellscha  LKQ

Very weak diversification

The 3 months correlation between Continental and LKQ is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Continental Aktiengesellschaft and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Continental Aktiengesellscha 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 Continental Aktiengesellschaft 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 Continental Aktiengesellscha i.e., Continental Aktiengesellscha and LKQ go up and down completely randomly.

Pair Corralation between Continental Aktiengesellscha and LKQ

Assuming the 90 days horizon Continental Aktiengesellschaft is expected to generate 0.89 times more return on investment than LKQ. However, Continental Aktiengesellschaft is 1.13 times less risky than LKQ. It trades about 0.28 of its potential returns per unit of risk. LKQ Corporation is currently generating about 0.02 per unit of risk. If you would invest  5,988  in Continental Aktiengesellschaft on September 22, 2024 and sell it today you would earn a total of  512.00  from holding Continental Aktiengesellschaft or generate 8.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Continental Aktiengesellschaft  vs.  LKQ Corp.

Continental Aktiengesellscha

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Aktiengesellschaft are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Continental Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

LKQ Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LKQ Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LKQ is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Continental Aktiengesellscha and LKQ

The main advantage of trading using opposite Continental Aktiengesellscha and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental Aktiengesellscha 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.

The idea behind Continental Aktiengesellschaft and LKQ Corporation 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.