Correlation Between Lamar Advertising and SIMS METAL
Can any of the company-specific risk be diversified away by investing in both Lamar Advertising and SIMS METAL 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 SIMS METAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamar Advertising and SIMS METAL MGT, you can compare the effects of market volatilities on Lamar Advertising and SIMS METAL 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 SIMS METAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamar Advertising and SIMS METAL.
Diversification Opportunities for Lamar Advertising and SIMS METAL
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lamar and SIMS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT 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 SIMS METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMS METAL MGT has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and SIMS METAL go up and down completely randomly.
Pair Corralation between Lamar Advertising and SIMS METAL
Assuming the 90 days trading horizon Lamar Advertising is expected to generate 0.78 times more return on investment than SIMS METAL. However, Lamar Advertising is 1.28 times less risky than SIMS METAL. It trades about 0.06 of its potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.01 per unit of risk. If you would invest 7,912 in Lamar Advertising on August 28, 2024 and sell it today you would earn a total of 4,588 from holding Lamar Advertising or generate 57.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamar Advertising vs. SIMS METAL MGT
Performance |
| Timeline |
| Lamar Advertising |
| SIMS METAL MGT |
Lamar Advertising and SIMS METAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamar Advertising and SIMS METAL
The main advantage of trading using opposite Lamar Advertising and SIMS METAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamar Advertising position performs unexpectedly, SIMS METAL 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 SIMS METAL will offset losses from the drop in SIMS METAL's long position.| Lamar Advertising vs. Playtech plc | Lamar Advertising vs. MAVEN WIRELESS SWEDEN | Lamar Advertising vs. IDP EDUCATION LTD | Lamar Advertising vs. Columbia Sportswear |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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