Correlation Between North American and Lamar Advertising
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Lamar Advertising into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Lamar Advertising, you can compare the effects of market volatilities on North American 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 North American with a short position of Lamar Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Lamar Advertising.
Diversification Opportunities for North American and Lamar Advertising
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between North and Lamar is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and North American 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 North American Construction 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 North American i.e., North American and Lamar Advertising go up and down completely randomly.
Pair Corralation between North American and Lamar Advertising
Assuming the 90 days horizon North American Construction is expected to generate 1.94 times more return on investment than Lamar Advertising. However, North American is 1.94 times more volatile than Lamar Advertising. It trades about 0.22 of its potential returns per unit of risk. Lamar Advertising is currently generating about 0.09 per unit of risk. If you would invest 1,530 in North American Construction on September 1, 2024 and sell it today you would earn a total of 260.00 from holding North American Construction or generate 16.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Lamar Advertising
Performance |
| Timeline |
| North American Const |
| Lamar Advertising |
North American and Lamar Advertising Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Lamar Advertising
The main advantage of trading using opposite North American and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Halliburton | North American vs. Tenaris SA | North American vs. Superior Plus Corp | North American vs. NMI Holdings |
| 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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