Correlation Between Lamar Advertising and DAIRY FARM
Can any of the company-specific risk be diversified away by investing in both Lamar Advertising and DAIRY FARM 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 Lamar Advertising and DAIRY FARM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamar Advertising and DAIRY FARM INTL, you can compare the effects of market volatilities on Lamar Advertising and DAIRY FARM 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 Lamar Advertising with a short position of DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamar Advertising and DAIRY FARM.
Diversification Opportunities for Lamar Advertising and DAIRY FARM
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lamar and DAIRY is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL and Lamar Advertising 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 Lamar Advertising are associated (or correlated) with DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and DAIRY FARM go up and down completely randomly.
Pair Corralation between Lamar Advertising and DAIRY FARM
Assuming the 90 days horizon Lamar Advertising is expected to generate 1.25 times less return on investment than DAIRY FARM. But when comparing it to its historical volatility, Lamar Advertising is 2.16 times less risky than DAIRY FARM. It trades about 0.09 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 222.00 in DAIRY FARM INTL on September 13, 2024 and sell it today you would earn a total of 4.00 from holding DAIRY FARM INTL or generate 1.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamar Advertising vs. DAIRY FARM INTL
Performance |
| Timeline |
| Lamar Advertising |
| DAIRY FARM INTL |
Lamar Advertising and DAIRY FARM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamar Advertising and DAIRY FARM
The main advantage of trading using opposite Lamar Advertising and DAIRY FARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamar Advertising position performs unexpectedly, DAIRY FARM 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 DAIRY FARM will offset losses from the drop in DAIRY FARM's long position.| Lamar Advertising vs. MCEWEN MINING INC | Lamar Advertising vs. Evolution Mining Limited | Lamar Advertising vs. Computershare Limited | Lamar Advertising vs. United Internet AG |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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