Correlation Between LKQ and Worksport

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

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

Diversification Opportunities for LKQ and Worksport

-0.78

Correlation Coefficient

LKQ  Worksport

Pay attention - limited upside

The 3 months correlation between LKQ and Worksport is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding LKQ Corp. and Worksport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worksport 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 Worksport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worksport has no effect on the direction of LKQ i.e., LKQ and Worksport go up and down completely randomly.

Pair Corralation between LKQ and Worksport

Considering the 90-day investment horizon LKQ Corporation is expected to generate 0.21 times more return on investment than Worksport. However, LKQ Corporation is 4.86 times less risky than Worksport. It trades about 0.17 of its potential returns per unit of risk. Worksport is currently generating about -0.2 per unit of risk. If you would invest  3,596  in LKQ Corporation on December 28, 2024 and sell it today you would earn a total of  544.00  from holding LKQ Corporation or generate 15.13% return on investment over 90 days.

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

LKQ Corp.  vs.  Worksport

LKQ Corporation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LKQ Corporation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, LKQ reported solid returns over the last few months and may actually be approaching a breakup point.

Worksport

Risk-Adjusted Performance

Very Weak

Over the last 90 days Worksport has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with LKQ and Worksport

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

The idea behind LKQ Corporation and Worksport 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.