Correlation Between G8 EDUCATION and Lamar Advertising

Can any of the company-specific risk be diversified away by investing in both G8 EDUCATION 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 G8 EDUCATION and Lamar Advertising into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G8 EDUCATION and Lamar Advertising, you can compare the effects of market volatilities on G8 EDUCATION 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 G8 EDUCATION with a short position of Lamar Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 EDUCATION and Lamar Advertising.

Diversification Opportunities for G8 EDUCATION and Lamar Advertising

0.26

Correlation Coefficient

G8 EDUCATION  Lamar Advertising

Modest diversification

The 3 months correlation between 3EAG and Lamar is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding G8 EDUCATION and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and G8 EDUCATION 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 G8 EDUCATION 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 G8 EDUCATION i.e., G8 EDUCATION and Lamar Advertising go up and down completely randomly.

Pair Corralation between G8 EDUCATION and Lamar Advertising

Assuming the 90 days trading horizon G8 EDUCATION is expected to generate 1.32 times more return on investment than Lamar Advertising. However, G8 EDUCATION is 1.32 times more volatile than Lamar Advertising. It trades about 0.09 of its potential returns per unit of risk. Lamar Advertising is currently generating about 0.09 per unit of risk. If you would invest  76.00  in G8 EDUCATION on September 13, 2024 and sell it today you would earn a total of  7.00  from holding G8 EDUCATION or generate 9.21% return on investment over 90 days.

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

G8 EDUCATION  vs.  Lamar Advertising

G8 EDUCATION

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in G8 EDUCATION are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, G8 EDUCATION may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lamar Advertising

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lamar Advertising are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lamar Advertising may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with G8 EDUCATION and Lamar Advertising

The main advantage of trading using opposite G8 EDUCATION and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 EDUCATION 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 G8 EDUCATION 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.