Correlation Between INFORMATION SVC and LKQ Corp

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

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

Diversification Opportunities for INFORMATION SVC and LKQ Corp

-0.51

Correlation Coefficient

INFORMATION SVC  LKQ Corp

Excellent diversification

The 3 months correlation between INFORMATION and LKQ is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding INFORMATION SVC GRP and LKQ Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corp and INFORMATION SVC 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 INFORMATION SVC GRP 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 INFORMATION SVC i.e., INFORMATION SVC and LKQ Corp go up and down completely randomly.

Pair Corralation between INFORMATION SVC and LKQ Corp

Assuming the 90 days horizon INFORMATION SVC is expected to generate 1.2 times less return on investment than LKQ Corp. In addition to that, INFORMATION SVC is 1.72 times more volatile than LKQ Corp. It trades about 0.05 of its total potential returns per unit of risk. LKQ Corp is currently generating about 0.09 per unit of volatility. If you would invest  3,495  in LKQ Corp on December 24, 2024 and sell it today you would earn a total of  265.00  from holding LKQ Corp or generate 7.58% return on investment over 90 days.

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

INFORMATION SVC GRP  vs.  LKQ Corp

INFORMATION SVC GRP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, INFORMATION SVC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

LKQ Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LKQ Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LKQ Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with INFORMATION SVC and LKQ Corp

The main advantage of trading using opposite INFORMATION SVC and LKQ Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INFORMATION SVC 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 INFORMATION SVC GRP 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.