Correlation Between LKQ and ECARX Holdings

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

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

Diversification Opportunities for LKQ and ECARX Holdings

0.27

Correlation Coefficient

LKQ  ECARX Holdings

Modest diversification

The 3 months correlation between LKQ and ECARX is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and ECARX Holdings Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECARX Holdings Class and LKQ 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 LKQ Corporation are associated (or correlated) with ECARX Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECARX Holdings Class has no effect on the direction of LKQ i.e., LKQ and ECARX Holdings go up and down completely randomly.

Pair Corralation between LKQ and ECARX Holdings

Considering the 90-day investment horizon LKQ Corporation is expected to under-perform the ECARX Holdings. But the stock apears to be less risky and, when comparing its historical volatility, LKQ Corporation is 3.51 times less risky than ECARX Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The ECARX Holdings Class is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  512.00  in ECARX Holdings Class on December 4, 2024 and sell it today you would lose (279.00) from holding ECARX Holdings Class or give up 54.49% of portfolio value over 90 days.

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

LKQ Corp.  vs.  ECARX Holdings Class

LKQ Corporation

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LKQ Corporation are ranked lower than 6 (%) 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.

ECARX Holdings Class

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Class are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LKQ and ECARX Holdings

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

The idea behind LKQ Corporation and ECARX Holdings Class 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.