Correlation Between Lamar Advertising and Cal Maine
Can any of the company-specific risk be diversified away by investing in both Lamar Advertising and Cal Maine 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 Cal Maine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamar Advertising and Cal Maine Foods, you can compare the effects of market volatilities on Lamar Advertising and Cal Maine 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 Cal Maine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamar Advertising and Cal Maine.
Diversification Opportunities for Lamar Advertising and Cal Maine
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lamar and Cal is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Cal Maine Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cal Maine Foods 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 Cal Maine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cal Maine Foods has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Cal Maine go up and down completely randomly.
Pair Corralation between Lamar Advertising and Cal Maine
Assuming the 90 days trading horizon Lamar Advertising is not expected to generate positive returns. However, Lamar Advertising is 1.71 times less risky than Cal Maine. It waists most of its returns potential to compensate for thr risk taken. Cal Maine is generating about 0.26 per unit of risk. If you would invest 6,638 in Cal Maine Foods on September 29, 2024 and sell it today you would earn a total of 3,086 from holding Cal Maine Foods or generate 46.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamar Advertising vs. Cal Maine Foods
Performance |
| Timeline |
| Lamar Advertising |
| Cal Maine Foods |
Lamar Advertising and Cal Maine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamar Advertising and Cal Maine
The main advantage of trading using opposite Lamar Advertising and Cal Maine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamar Advertising position performs unexpectedly, Cal Maine 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 Cal Maine will offset losses from the drop in Cal Maine'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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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