Correlation Between Innoviz Technologies and LKQ

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

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

Diversification Opportunities for Innoviz Technologies and LKQ

0.55

Correlation Coefficient

Innoviz Technologies  LKQ

Very weak diversification

The 3 months correlation between Innoviz and LKQ is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Innoviz Technologies and LKQ Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LKQ Corporation and Innoviz Technologies 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 Innoviz Technologies 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 Innoviz Technologies i.e., Innoviz Technologies and LKQ go up and down completely randomly.

Pair Corralation between Innoviz Technologies and LKQ

Given the investment horizon of 90 days Innoviz Technologies is expected to under-perform the LKQ. In addition to that, Innoviz Technologies is 2.36 times more volatile than LKQ Corporation. It trades about -0.05 of its total potential returns per unit of risk. LKQ Corporation is currently generating about -0.05 per unit of volatility. If you would invest  4,857  in LKQ Corporation on February 14, 2024 and sell it today you would lose (386.00) from holding LKQ Corporation or give up 7.95% of portfolio value over 90 days.

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

Innoviz Technologies  vs.  LKQ Corp.

Innoviz Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innoviz Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. 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 latest weak performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Innoviz Technologies and LKQ

The main advantage of trading using opposite Innoviz Technologies and LKQ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innoviz Technologies 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 Innoviz Technologies 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.