Correlation Between LKQ and Steven Madden

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

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

Diversification Opportunities for LKQ and Steven Madden

0.46

Correlation Coefficient

LKQ  Steven Madden

Very weak diversification

The 3 months correlation between LKQ and Steven is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of LKQ i.e., LKQ and Steven Madden go up and down completely randomly.

Pair Corralation between LKQ and Steven Madden

Considering the 90-day investment horizon LKQ Corporation is expected to under-perform the Steven Madden. But the stock apears to be less risky and, when comparing its historical volatility, LKQ Corporation is 1.32 times less risky than Steven Madden. The stock trades about -0.08 of its potential returns per unit of risk. The Steven Madden is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,687  in Steven Madden on September 17, 2024 and sell it today you would lose (320.00) from holding Steven Madden or give up 6.83% 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.  Steven Madden

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Steven Madden is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with LKQ and Steven Madden

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

The idea behind LKQ Corporation and Steven Madden 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..