Correlation Between AEON STORES and LKQ

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

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

Diversification Opportunities for AEON STORES and LKQ

0.0

Correlation Coefficient

AEON STORES  LKQ

Pay attention - limited upside

The 3 months correlation between AEON and LKQ is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AEON STORES and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and AEON STORES 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 AEON STORES 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 AEON STORES i.e., AEON STORES and LKQ go up and down completely randomly.

Pair Corralation between AEON STORES and LKQ

Assuming the 90 days trading horizon AEON STORES is expected to generate 1.82 times more return on investment than LKQ. However, AEON STORES is 1.82 times more volatile than LKQ Corporation. It trades about 0.0 of its potential returns per unit of risk. LKQ Corporation is currently generating about -0.03 per unit of risk. If you would invest  8.37  in AEON STORES on September 27, 2024 and sell it today you would lose (2.32) from holding AEON STORES or give up 27.72% of portfolio value over 90 days.

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

AEON STORES  vs.  LKQ Corp.

AEON STORES

Risk-Adjusted Performance

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Very Weak

Over the last 90 days AEON STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AEON STORES is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the 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. 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 AEON STORES and LKQ

The main advantage of trading using opposite AEON STORES and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEON STORES 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 AEON STORES 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.