Correlation Between Compagnie Generale and LKQ

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

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

Diversification Opportunities for Compagnie Generale and LKQ

0.42

Correlation Coefficient

Compagnie Generale  LKQ

Very weak diversification

The 3 months correlation between Compagnie and LKQ is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Generale des and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Compagnie Generale 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 Compagnie Generale des are associated (or correlated) with LKQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LKQ Corporation has no effect on the direction of Compagnie Generale i.e., Compagnie Generale and LKQ go up and down completely randomly.

Pair Corralation between Compagnie Generale and LKQ

Assuming the 90 days horizon Compagnie Generale des is expected to generate 0.88 times more return on investment than LKQ. However, Compagnie Generale des is 1.13 times less risky than LKQ. It trades about 0.04 of its potential returns per unit of risk. LKQ Corporation is currently generating about -0.03 per unit of risk. If you would invest  1,317  in Compagnie Generale des on September 14, 2024 and sell it today you would earn a total of  376.00  from holding Compagnie Generale des or generate 28.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Compagnie Generale des  vs.  LKQ Corp.

Compagnie Generale des

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie Generale des has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Compagnie Generale and LKQ

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

The idea behind Compagnie Generale des and LKQ Corporation 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.