Correlation Between Lamar Advertising and Microsoft
Can any of the company-specific risk be diversified away by investing in both Lamar Advertising and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamar Advertising and Microsoft, you can compare the effects of market volatilities on Lamar Advertising and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamar Advertising and Microsoft.
Diversification Opportunities for Lamar Advertising and Microsoft
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lamar and Microsoft is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Microsoft go up and down completely randomly.
Pair Corralation between Lamar Advertising and Microsoft
Assuming the 90 days trading horizon Lamar Advertising is expected to generate 1.84 times less return on investment than Microsoft. In addition to that, Lamar Advertising is 1.24 times more volatile than Microsoft. It trades about 0.13 of its total potential returns per unit of risk. Microsoft is currently generating about 0.3 per unit of volatility. If you would invest 37,461 in Microsoft on September 4, 2024 and sell it today you would earn a total of 3,654 from holding Microsoft or generate 9.75% 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. Microsoft
Performance |
| Timeline |
| Lamar Advertising |
| Microsoft |
Lamar Advertising and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamar Advertising and Microsoft
The main advantage of trading using opposite Lamar Advertising and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamar Advertising position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc |
| Microsoft vs. Vulcan Materials | Microsoft vs. Hyster Yale Materials Handling | Microsoft vs. CODERE ONLINE LUX | Microsoft vs. Lamar Advertising |
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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