Correlation Between Anheuser Busch and Lamar Advertising

Can any of the company-specific risk be diversified away by investing in both Anheuser Busch 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 Anheuser Busch and Lamar Advertising into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anheuser Busch InBev SANV and Lamar Advertising, you can compare the effects of market volatilities on Anheuser Busch 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 Anheuser Busch with a short position of Lamar Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anheuser Busch and Lamar Advertising.

Diversification Opportunities for Anheuser Busch and Lamar Advertising

0.05

Correlation Coefficient

Anheuser Busch  Lamar Advertising

Significant diversification

The 3 months correlation between Anheuser and Lamar is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch InBev SANV and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and Anheuser Busch 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 Anheuser Busch InBev SANV 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 Anheuser Busch i.e., Anheuser Busch and Lamar Advertising go up and down completely randomly.

Pair Corralation between Anheuser Busch and Lamar Advertising

Assuming the 90 days trading horizon Anheuser Busch InBev SANV is expected to under-perform the Lamar Advertising. But the stock apears to be less risky and, when comparing its historical volatility, Anheuser Busch InBev SANV is 1.09 times less risky than Lamar Advertising. The stock trades about -0.08 of its potential returns per unit of risk. The Lamar Advertising is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,748  in Lamar Advertising on October 4, 2024 and sell it today you would earn a total of  952.00  from holding Lamar Advertising or generate 8.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Anheuser Busch InBev SANV  vs.  Lamar Advertising

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch InBev SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lamar Advertising

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lamar Advertising has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lamar Advertising is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Anheuser Busch and Lamar Advertising

The main advantage of trading using opposite Anheuser Busch and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch 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 Anheuser Busch InBev SANV 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.