Correlation Between Lamar Advertising and Sumitomo Chemical
Can any of the company-specific risk be diversified away by investing in both Lamar Advertising and Sumitomo Chemical 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 Sumitomo Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamar Advertising and Sumitomo Chemical, you can compare the effects of market volatilities on Lamar Advertising and Sumitomo Chemical 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 Sumitomo Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamar Advertising and Sumitomo Chemical.
Diversification Opportunities for Lamar Advertising and Sumitomo Chemical
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lamar and Sumitomo is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Sumitomo Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Chemical 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 Sumitomo Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Chemical has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Sumitomo Chemical go up and down completely randomly.
Pair Corralation between Lamar Advertising and Sumitomo Chemical
Assuming the 90 days trading horizon Lamar Advertising is expected to generate 1.37 times more return on investment than Sumitomo Chemical. However, Lamar Advertising is 1.37 times more volatile than Sumitomo Chemical. It trades about 0.09 of its potential returns per unit of risk. Sumitomo Chemical is currently generating about -0.24 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamar Advertising vs. Sumitomo Chemical
Performance |
| Timeline |
| Lamar Advertising |
| Sumitomo Chemical |
Lamar Advertising and Sumitomo Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamar Advertising and Sumitomo Chemical
The main advantage of trading using opposite Lamar Advertising and Sumitomo Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamar Advertising position performs unexpectedly, Sumitomo Chemical 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 Sumitomo Chemical will offset losses from the drop in Sumitomo Chemical'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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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