Correlation Between Autoliv and LKQ

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

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

Diversification Opportunities for Autoliv and LKQ

0.02

Correlation Coefficient

Autoliv  LKQ

Significant diversification

The 3 months correlation between Autoliv and LKQ is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Autoliv 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 Autoliv 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 Autoliv i.e., Autoliv and LKQ go up and down completely randomly.

Pair Corralation between Autoliv and LKQ

Considering the 90-day investment horizon Autoliv is expected to generate 27.12 times less return on investment than LKQ. In addition to that, Autoliv is 1.34 times more volatile than LKQ Corporation. It trades about 0.0 of its total potential returns per unit of risk. LKQ Corporation is currently generating about 0.14 per unit of volatility. If you would invest  3,663  in LKQ Corporation on December 27, 2024 and sell it today you would earn a total of  436.00  from holding LKQ Corporation or generate 11.9% return on investment over 90 days.

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

Autoliv  vs.  LKQ Corp.

Autoliv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Autoliv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Autoliv is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

LKQ Corporation

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LKQ Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, LKQ may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Autoliv and LKQ

The main advantage of trading using opposite Autoliv and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autoliv 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 Autoliv 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.