Correlation Between Motorcar Parts and LKQ

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

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

Diversification Opportunities for Motorcar Parts and LKQ

0.13

Correlation Coefficient

Motorcar Parts  LKQ

Average diversification

The 3 months correlation between Motorcar and LKQ is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Motorcar Parts of and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Motorcar Parts 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 Motorcar Parts of 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 Motorcar Parts i.e., Motorcar Parts and LKQ go up and down completely randomly.

Pair Corralation between Motorcar Parts and LKQ

Given the investment horizon of 90 days Motorcar Parts of is expected to generate 2.72 times more return on investment than LKQ. However, Motorcar Parts is 2.72 times more volatile than LKQ Corporation. It trades about 0.26 of its potential returns per unit of risk. LKQ Corporation is currently generating about -0.03 per unit of risk. If you would invest  542.00  in Motorcar Parts of on September 26, 2024 and sell it today you would earn a total of  253.00  from holding Motorcar Parts of or generate 46.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Motorcar Parts of  vs.  LKQ Corp.

Motorcar Parts

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Motorcar Parts of are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Motorcar Parts sustained 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. Even with latest weak performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Motorcar Parts and LKQ

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

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.