Correlation Between INDO RAMA and Lamar Advertising

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

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

Diversification Opportunities for INDO RAMA and Lamar Advertising

0.0

Correlation Coefficient

INDO RAMA  Lamar Advertising

Pay attention - limited upside

The 3 months correlation between INDO and Lamar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding INDO RAMA SYNTHETIC and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and INDO RAMA 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 INDO RAMA SYNTHETIC 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 INDO RAMA i.e., INDO RAMA and Lamar Advertising go up and down completely randomly.

Pair Corralation between INDO RAMA and Lamar Advertising

Assuming the 90 days trading horizon INDO RAMA SYNTHETIC is expected to under-perform the Lamar Advertising. In addition to that, INDO RAMA is 1.91 times more volatile than Lamar Advertising. It trades about -0.02 of its total potential returns per unit of risk. Lamar Advertising is currently generating about 0.05 per unit of volatility. If you would invest  8,501  in Lamar Advertising on October 4, 2024 and sell it today you would earn a total of  3,099  from holding Lamar Advertising or generate 36.45% return on investment over 90 days.

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

INDO RAMA SYNTHETIC  vs.  Lamar Advertising

INDO RAMA SYNTHETIC

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 comparatively stable basic indicators, Lamar Advertising is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with INDO RAMA and Lamar Advertising

The main advantage of trading using opposite INDO RAMA and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDO RAMA 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 INDO RAMA SYNTHETIC 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.