Correlation Between Everi Holdings and LKQ

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

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

Diversification Opportunities for Everi Holdings and LKQ

0.62

Correlation Coefficient

Everi Holdings  LKQ

Poor diversification

The 3 months correlation between Everi and LKQ is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Everi Holdings and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Everi Holdings 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 Everi Holdings 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 Everi Holdings i.e., Everi Holdings and LKQ go up and down completely randomly.

Pair Corralation between Everi Holdings and LKQ

Given the investment horizon of 90 days Everi Holdings is expected to generate 19.18 times less return on investment than LKQ. But when comparing it to its historical volatility, Everi Holdings is 7.1 times less risky than LKQ. It trades about 0.05 of its potential returns per unit of risk. LKQ Corporation is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,674  in LKQ Corporation on December 26, 2024 and sell it today you would earn a total of  425.00  from holding LKQ Corporation or generate 11.57% return on investment over 90 days.

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

Everi Holdings  vs.  LKQ Corp.

Everi Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Everi Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Everi Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 Everi Holdings and LKQ

The main advantage of trading using opposite Everi Holdings and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Everi Holdings 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 Everi Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.