Correlation Between AECOM TECHNOLOGY and Lamar Advertising
Can any of the company-specific risk be diversified away by investing in both AECOM TECHNOLOGY 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 AECOM TECHNOLOGY and Lamar Advertising into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AECOM TECHNOLOGY and Lamar Advertising, you can compare the effects of market volatilities on AECOM TECHNOLOGY 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 AECOM TECHNOLOGY with a short position of Lamar Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of AECOM TECHNOLOGY and Lamar Advertising.
Diversification Opportunities for AECOM TECHNOLOGY and Lamar Advertising
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AECOM and Lamar is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding AECOM TECHNOLOGY and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and AECOM TECHNOLOGY 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 AECOM TECHNOLOGY 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 AECOM TECHNOLOGY i.e., AECOM TECHNOLOGY and Lamar Advertising go up and down completely randomly.
Pair Corralation between AECOM TECHNOLOGY and Lamar Advertising
Assuming the 90 days trading horizon AECOM TECHNOLOGY is expected to generate 1.28 times more return on investment than Lamar Advertising. However, AECOM TECHNOLOGY is 1.28 times more volatile than Lamar Advertising. It trades about 0.1 of its potential returns per unit of risk. Lamar Advertising is currently generating about 0.09 per unit of risk. If you would invest 8,187 in AECOM TECHNOLOGY on September 1, 2024 and sell it today you would earn a total of 2,813 from holding AECOM TECHNOLOGY or generate 34.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AECOM TECHNOLOGY vs. Lamar Advertising
Performance |
| Timeline |
| AECOM TECHNOLOGY |
| Lamar Advertising |
AECOM TECHNOLOGY and Lamar Advertising Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AECOM TECHNOLOGY and Lamar Advertising
The main advantage of trading using opposite AECOM TECHNOLOGY and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AECOM TECHNOLOGY 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.| AECOM TECHNOLOGY vs. Axcelis Technologies | AECOM TECHNOLOGY vs. National Retail Properties | AECOM TECHNOLOGY vs. THORNEY TECHS LTD | AECOM TECHNOLOGY vs. Canon Marketing Japan |
| 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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