Correlation Between LKQ and Miller Industries

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

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

Diversification Opportunities for LKQ and Miller Industries

-0.25

Correlation Coefficient

LKQ  Miller Industries

Very good diversification

The 3 months correlation between LKQ and Miller is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Miller Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miller Industries 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 Miller Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miller Industries has no effect on the direction of LKQ i.e., LKQ and Miller Industries go up and down completely randomly.

Pair Corralation between LKQ and Miller Industries

Considering the 90-day investment horizon LKQ Corporation is expected to under-perform the Miller Industries. But the stock apears to be less risky and, when comparing its historical volatility, LKQ Corporation is 1.35 times less risky than Miller Industries. The stock trades about -0.08 of its potential returns per unit of risk. The Miller Industries is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  6,719  in Miller Industries on September 17, 2024 and sell it today you would earn a total of  485.00  from holding Miller Industries or generate 7.22% return on investment over 90 days.

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

LKQ Corp.  vs.  Miller Industries

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 latest unfluctuating performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Miller Industries

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Miller Industries are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating essential indicators, Miller Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LKQ and Miller Industries

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

The idea behind LKQ Corporation and Miller Industries 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.