Correlation Between Lumia and LKQ Corp

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

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

Diversification Opportunities for Lumia and LKQ Corp

0.09

Correlation Coefficient

Lumia  LKQ Corp

Significant diversification

The 3 months correlation between Lumia and LKQ is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Lumia and LKQ Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corp and Lumia 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 Lumia are associated (or correlated) with LKQ Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LKQ Corp has no effect on the direction of Lumia i.e., Lumia and LKQ Corp go up and down completely randomly.

Pair Corralation between Lumia and LKQ Corp

Assuming the 90 days trading horizon Lumia is expected to generate 92.53 times more return on investment than LKQ Corp. However, Lumia is 92.53 times more volatile than LKQ Corp. It trades about 0.12 of its potential returns per unit of risk. LKQ Corp is currently generating about 0.09 per unit of risk. If you would invest  0.00  in Lumia on October 24, 2024 and sell it today you would earn a total of  95.00  from holding Lumia or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Lumia  vs.  LKQ Corp

Lumia

Risk-Adjusted Performance

9 of 100

OK

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

LKQ Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LKQ Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, LKQ Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lumia and LKQ Corp

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

The idea behind Lumia and LKQ 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.