Correlation Between Genco Shipping and LKQ

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

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

Diversification Opportunities for Genco Shipping and LKQ

0.32

Correlation Coefficient

Genco Shipping  LKQ

Weak diversification

The 3 months correlation between Genco and LKQ is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Genco Shipping Trading and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Genco Shipping 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 Genco Shipping Trading 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 Genco Shipping i.e., Genco Shipping and LKQ go up and down completely randomly.

Pair Corralation between Genco Shipping and LKQ

Assuming the 90 days trading horizon Genco Shipping is expected to generate 5.82 times less return on investment than LKQ. In addition to that, Genco Shipping is 1.17 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 0.03 per unit of volatility. If you would invest  3,649  in LKQ Corporation on September 3, 2024 and sell it today you would earn a total of  71.00  from holding LKQ Corporation or generate 1.95% return on investment over 90 days.

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

Genco Shipping Trading  vs.  LKQ Corp.

Genco Shipping Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genco Shipping Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Genco Shipping is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

LKQ Corporation

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in LKQ Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, LKQ is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Genco Shipping and LKQ

The main advantage of trading using opposite Genco Shipping and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genco Shipping 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 Genco Shipping Trading 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.