Correlation Between Lamar Advertising and INSURANCE AUST

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

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

Diversification Opportunities for Lamar Advertising and INSURANCE AUST

0.08

Correlation Coefficient

Lamar Advertising  INSURANCE AUST

Significant diversification

The 3 months correlation between Lamar and INSURANCE is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP and Lamar Advertising 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 Lamar Advertising are associated (or correlated) with INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and INSURANCE AUST go up and down completely randomly.

Pair Corralation between Lamar Advertising and INSURANCE AUST

Assuming the 90 days trading horizon Lamar Advertising is expected to under-perform the INSURANCE AUST. But the stock apears to be less risky and, when comparing its historical volatility, Lamar Advertising is 1.59 times less risky than INSURANCE AUST. The stock trades about -0.3 of its potential returns per unit of risk. The INSURANCE AUST GRP is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  515.00  in INSURANCE AUST GRP on October 10, 2024 and sell it today you would lose (19.00) from holding INSURANCE AUST GRP or give up 3.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Lamar Advertising  vs.  INSURANCE AUST GRP

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

INSURANCE AUST GRP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Lamar Advertising and INSURANCE AUST

The main advantage of trading using opposite Lamar Advertising and INSURANCE AUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lamar Advertising position performs unexpectedly, INSURANCE AUST 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 INSURANCE AUST will offset losses from the drop in INSURANCE AUST's long position.

The idea behind Lamar Advertising and INSURANCE AUST GRP 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.