Correlation Between LKQ and Innoviz Technologies

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

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

Diversification Opportunities for LKQ and Innoviz Technologies

-0.58

Correlation Coefficient

LKQ  Innoviz Technologies

Excellent diversification

The 3 months correlation between LKQ and Innoviz is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Innoviz Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innoviz Technologies 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 Innoviz Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innoviz Technologies has no effect on the direction of LKQ i.e., LKQ and Innoviz Technologies go up and down completely randomly.

Pair Corralation between LKQ and Innoviz Technologies

Considering the 90-day investment horizon LKQ Corporation is expected to under-perform the Innoviz Technologies. But the stock apears to be less risky and, when comparing its historical volatility, LKQ Corporation is 51.26 times less risky than Innoviz Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The Innoviz Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Innoviz Technologies on October 21, 2024 and sell it today you would lose (28.00) from holding Innoviz Technologies or give up 59.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.67%
Values	Daily Returns

LKQ Corp.  vs.  Innoviz Technologies

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. Even with relatively invariable forward-looking signals, LKQ is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Innoviz Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innoviz Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Innoviz Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LKQ and Innoviz Technologies

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

The idea behind LKQ Corporation and Innoviz Technologies 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 Anywhere module to track or share privately all of your investments from the convenience of any device.