Correlation Between Adtalem Global and LKQ Corp

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

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

Diversification Opportunities for Adtalem Global and LKQ Corp

-0.09

Correlation Coefficient

Adtalem Global  LKQ Corp

Good diversification

The 3 months correlation between Adtalem and LKQ is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Adtalem Global Education and LKQ Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corp and Adtalem Global 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 Adtalem Global Education are associated (or correlated) with LKQ Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LKQ Corp has no effect on the direction of Adtalem Global i.e., Adtalem Global and LKQ Corp go up and down completely randomly.

Pair Corralation between Adtalem Global and LKQ Corp

Assuming the 90 days trading horizon Adtalem Global is expected to generate 1.54 times less return on investment than LKQ Corp. In addition to that, Adtalem Global is 1.67 times more volatile than LKQ Corp. It trades about 0.04 of its total potential returns per unit of risk. LKQ Corp is currently generating about 0.09 per unit of volatility. If you would invest  3,495  in LKQ Corp on December 21, 2024 and sell it today you would earn a total of  265.00  from holding LKQ Corp or generate 7.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Adtalem Global Education  vs.  LKQ Corp

Adtalem Global Education

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adtalem Global Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Adtalem Global is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

LKQ Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LKQ Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, LKQ Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Adtalem Global and LKQ Corp

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

The idea behind Adtalem Global Education and LKQ Corp 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.