Correlation Between SALESFORCE INC and Lamar Advertising
Can any of the company-specific risk be diversified away by investing in both SALESFORCE INC 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 SALESFORCE INC and Lamar Advertising into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SALESFORCE INC CDR and Lamar Advertising, you can compare the effects of market volatilities on SALESFORCE INC 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 SALESFORCE INC with a short position of Lamar Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of SALESFORCE INC and Lamar Advertising.
Diversification Opportunities for SALESFORCE INC and Lamar Advertising
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SALESFORCE and Lamar is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SALESFORCE INC CDR and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and SALESFORCE INC 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 SALESFORCE INC CDR 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 SALESFORCE INC i.e., SALESFORCE INC and Lamar Advertising go up and down completely randomly.
Pair Corralation between SALESFORCE INC and Lamar Advertising
Assuming the 90 days trading horizon SALESFORCE INC CDR is expected to generate 1.51 times more return on investment than Lamar Advertising. However, SALESFORCE INC is 1.51 times more volatile than Lamar Advertising. It trades about 0.07 of its potential returns per unit of risk. Lamar Advertising is currently generating about 0.1 per unit of risk. If you would invest 1,202 in SALESFORCE INC CDR on August 29, 2024 and sell it today you would earn a total of 638.00 from holding SALESFORCE INC CDR or generate 53.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SALESFORCE INC CDR vs. Lamar Advertising
Performance |
| Timeline |
| SALESFORCE INC CDR |
| Lamar Advertising |
SALESFORCE INC and Lamar Advertising Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SALESFORCE INC and Lamar Advertising
The main advantage of trading using opposite SALESFORCE INC and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SALESFORCE INC 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.The idea behind SALESFORCE INC CDR and Lamar Advertising pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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