Correlation Between Lamar Advertising and Datadog
Can any of the company-specific risk be diversified away by investing in both Lamar Advertising and Datadog 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 Datadog into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamar Advertising and Datadog, you can compare the effects of market volatilities on Lamar Advertising and Datadog 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 Datadog. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamar Advertising and Datadog.
Diversification Opportunities for Lamar Advertising and Datadog
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lamar and Datadog is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Datadog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datadog 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 Datadog. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datadog has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Datadog go up and down completely randomly.
Pair Corralation between Lamar Advertising and Datadog
Assuming the 90 days trading horizon Lamar Advertising is expected to generate 1.34 times less return on investment than Datadog. But when comparing it to its historical volatility, Lamar Advertising is 1.94 times less risky than Datadog. It trades about 0.09 of its potential returns per unit of risk. Datadog is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 8,675 in Datadog on August 31, 2024 and sell it today you would earn a total of 5,737 from holding Datadog or generate 66.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
Lamar Advertising vs. Datadog
Performance |
| Timeline |
| Lamar Advertising |
| Datadog |
Lamar Advertising and Datadog Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamar Advertising and Datadog
The main advantage of trading using opposite Lamar Advertising and Datadog positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamar Advertising position performs unexpectedly, Datadog 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 Datadog will offset losses from the drop in Datadog's long position.| Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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