Correlation Between Lamar Advertising and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both Lamar Advertising and Silicon Motion 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 Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamar Advertising and Silicon Motion Technology, you can compare the effects of market volatilities on Lamar Advertising and Silicon Motion 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 Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamar Advertising and Silicon Motion.
Diversification Opportunities for Lamar Advertising and Silicon Motion
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lamar and Silicon is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology 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 Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Silicon Motion go up and down completely randomly.
Pair Corralation between Lamar Advertising and Silicon Motion
Assuming the 90 days trading horizon Lamar Advertising is expected to generate 0.7 times more return on investment than Silicon Motion. However, Lamar Advertising is 1.43 times less risky than Silicon Motion. It trades about 0.09 of its potential returns per unit of risk. Silicon Motion Technology is currently generating about 0.04 per unit of risk. If you would invest 12,200 in Lamar Advertising on September 1, 2024 and sell it today you would earn a total of 400.00 from holding Lamar Advertising or generate 3.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamar Advertising vs. Silicon Motion Technology
Performance |
| Timeline |
| Lamar Advertising |
| Silicon Motion Technology |
Lamar Advertising and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamar Advertising and Silicon Motion
The main advantage of trading using opposite Lamar Advertising and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamar Advertising position performs unexpectedly, Silicon Motion 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 Silicon Motion will offset losses from the drop in Silicon Motion's long position.| Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc | Lamar Advertising vs. Apple Inc |
| Silicon Motion vs. Norwegian Air Shuttle | Silicon Motion vs. WIZZ AIR HLDGUNSPADR4 | Silicon Motion vs. ELMOS SEMICONDUCTOR | Silicon Motion vs. Enter Air SA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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