Correlation Between Chesapeake Utilities and Lamar Advertising
Can any of the company-specific risk be diversified away by investing in both Chesapeake Utilities and Lamar Advertising 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 Chesapeake Utilities and Lamar Advertising into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chesapeake Utilities and Lamar Advertising, you can compare the effects of market volatilities on Chesapeake Utilities and Lamar Advertising 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 Chesapeake Utilities with a short position of Lamar Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Utilities and Lamar Advertising.
Diversification Opportunities for Chesapeake Utilities and Lamar Advertising
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chesapeake and Lamar is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Utilities and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and Chesapeake Utilities 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 Chesapeake Utilities are associated (or correlated) with Lamar Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamar Advertising has no effect on the direction of Chesapeake Utilities i.e., Chesapeake Utilities and Lamar Advertising go up and down completely randomly.
Pair Corralation between Chesapeake Utilities and Lamar Advertising
Assuming the 90 days horizon Chesapeake Utilities is expected to generate 5.75 times less return on investment than Lamar Advertising. But when comparing it to its historical volatility, Chesapeake Utilities is 1.11 times less risky than Lamar Advertising. It trades about 0.02 of its potential returns per unit of risk. Lamar Advertising is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 7,944 in Lamar Advertising on August 31, 2024 and sell it today you would earn a total of 4,656 from holding Lamar Advertising or generate 58.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chesapeake Utilities vs. Lamar Advertising
Performance |
| Timeline |
| Chesapeake Utilities |
| Lamar Advertising |
Chesapeake Utilities and Lamar Advertising Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chesapeake Utilities and Lamar Advertising
The main advantage of trading using opposite Chesapeake Utilities and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Utilities position performs unexpectedly, Lamar Advertising 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 Lamar Advertising will offset losses from the drop in Lamar Advertising's long position.| Chesapeake Utilities vs. CenterPoint Energy | Chesapeake Utilities vs. Snam SpA | Chesapeake Utilities vs. ENN Energy Holdings | Chesapeake Utilities vs. Superior Plus Corp |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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