Correlation Between Arhaus and LKQ

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

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

Diversification Opportunities for Arhaus and LKQ

0.83

Correlation Coefficient

Arhaus  LKQ

Very poor diversification

The 3 months correlation between Arhaus and LKQ is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Arhaus Inc and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Arhaus 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 Arhaus Inc 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 Arhaus i.e., Arhaus and LKQ go up and down completely randomly.

Pair Corralation between Arhaus and LKQ

Given the investment horizon of 90 days Arhaus Inc is expected to under-perform the LKQ. In addition to that, Arhaus is 2.37 times more volatile than LKQ Corporation. It trades about -0.06 of its total potential returns per unit of risk. LKQ Corporation is currently generating about -0.04 per unit of volatility. If you would invest  4,099  in LKQ Corporation on September 2, 2024 and sell it today you would lose (170.00) from holding LKQ Corporation or give up 4.15% of portfolio value over 90 days.

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

Arhaus Inc  vs.  LKQ Corp.

Arhaus Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arhaus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Arhaus and LKQ

The main advantage of trading using opposite Arhaus and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arhaus 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 Arhaus Inc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.