Correlation Between LKQ and Global E

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

By analyzing existing cross correlation between LKQ Corporation and Global E Online, you can compare the effects of market volatilities on LKQ and Global E 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 Global E. Check out your portfolio center. Please also check ongoing floating volatility patterns of LKQ and Global E.

Diversification Opportunities for LKQ and Global E

-0.4

Correlation Coefficient

LKQ  Global E

Very good diversification

The 3 months correlation between LKQ and Global is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Global E Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Online 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 Global E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Online has no effect on the direction of LKQ i.e., LKQ and Global E go up and down completely randomly.

Pair Corralation between LKQ and Global E

Considering the 90-day investment horizon LKQ Corporation is expected to under-perform the Global E. But the stock apears to be less risky and, when comparing its historical volatility, LKQ Corporation is 1.76 times less risky than Global E. The stock trades about -0.05 of its potential returns per unit of risk. The Global E Online is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,442  in Global E Online on August 30, 2024 and sell it today you would earn a total of  1,744  from holding Global E Online or generate 50.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

LKQ Corp.  vs.  Global E Online

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. Even with relatively invariable forward-looking signals, LKQ is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Global E Online

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LKQ and Global E

The main advantage of trading using opposite LKQ and Global E positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LKQ position performs unexpectedly, Global E 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 Global E will offset losses from the drop in Global E's long position.

The idea behind LKQ Corporation and Global E Online 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.