Correlation Between LKQ and Quantumscape Corp

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

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

Diversification Opportunities for LKQ and Quantumscape Corp

0.4

Correlation Coefficient

LKQ  Quantumscape Corp

Very weak diversification

The 3 months correlation between LKQ and Quantumscape is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Quantumscape Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantumscape Corp 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 Quantumscape Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantumscape Corp has no effect on the direction of LKQ i.e., LKQ and Quantumscape Corp go up and down completely randomly.

Pair Corralation between LKQ and Quantumscape Corp

Considering the 90-day investment horizon LKQ Corporation is expected to under-perform the Quantumscape Corp. But the stock apears to be less risky and, when comparing its historical volatility, LKQ Corporation is 2.78 times less risky than Quantumscape Corp. The stock trades about -0.01 of its potential returns per unit of risk. The Quantumscape Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  550.00  in Quantumscape Corp on September 5, 2024 and sell it today you would lose (49.00) from holding Quantumscape Corp or give up 8.91% of portfolio value over 90 days.

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

LKQ Corp.  vs.  Quantumscape Corp

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.

Quantumscape Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantumscape Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Quantumscape Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with LKQ and Quantumscape Corp

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

The idea behind LKQ Corporation and Quantumscape Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..