Correlation Between Lamar Advertising and UPDATE SOFTWARE
Can any of the company-specific risk be diversified away by investing in both Lamar Advertising and UPDATE SOFTWARE 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 UPDATE SOFTWARE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lamar Advertising and UPDATE SOFTWARE, you can compare the effects of market volatilities on Lamar Advertising and UPDATE SOFTWARE 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 UPDATE SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lamar Advertising and UPDATE SOFTWARE.
Diversification Opportunities for Lamar Advertising and UPDATE SOFTWARE
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lamar and UPDATE is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and UPDATE SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPDATE SOFTWARE 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 UPDATE SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPDATE SOFTWARE has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and UPDATE SOFTWARE go up and down completely randomly.
Pair Corralation between Lamar Advertising and UPDATE SOFTWARE
Assuming the 90 days trading horizon Lamar Advertising is expected to generate 5.15 times less return on investment than UPDATE SOFTWARE. But when comparing it to its historical volatility, Lamar Advertising is 2.72 times less risky than UPDATE SOFTWARE. It trades about 0.08 of its potential returns per unit of risk. UPDATE SOFTWARE is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,506 in UPDATE SOFTWARE on September 14, 2024 and sell it today you would earn a total of 129.00 from holding UPDATE SOFTWARE or generate 8.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lamar Advertising vs. UPDATE SOFTWARE
Performance |
| Timeline |
| Lamar Advertising |
| UPDATE SOFTWARE |
Lamar Advertising and UPDATE SOFTWARE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lamar Advertising and UPDATE SOFTWARE
The main advantage of trading using opposite Lamar Advertising and UPDATE SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamar Advertising position performs unexpectedly, UPDATE SOFTWARE 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 UPDATE SOFTWARE will offset losses from the drop in UPDATE SOFTWARE's long position.| Lamar Advertising vs. Microbot Medical | Lamar Advertising vs. BII Railway Transportation | Lamar Advertising vs. SAFETY MEDICAL PROD | Lamar Advertising vs. CVR Medical Corp |
| UPDATE SOFTWARE vs. Apple Inc | UPDATE SOFTWARE vs. Apple Inc | UPDATE SOFTWARE vs. Apple Inc | UPDATE SOFTWARE 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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