Correlation Between Lamar Advertising and SECURITAS

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

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

Diversification Opportunities for Lamar Advertising and SECURITAS

0.04

Correlation Coefficient

Lamar Advertising  SECURITAS

Significant diversification

The 3 months correlation between Lamar and SECURITAS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and SECURITAS B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SECURITAS B 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 SECURITAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SECURITAS B has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and SECURITAS go up and down completely randomly.

Pair Corralation between Lamar Advertising and SECURITAS

Assuming the 90 days trading horizon Lamar Advertising is expected to generate 4.79 times less return on investment than SECURITAS. But when comparing it to its historical volatility, Lamar Advertising is 1.75 times less risky than SECURITAS. It trades about 0.06 of its potential returns per unit of risk. SECURITAS B is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  786.00  in SECURITAS B on October 4, 2024 and sell it today you would earn a total of  417.00  from holding SECURITAS B or generate 53.05% return on investment over 90 days.

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

Lamar Advertising  vs.  SECURITAS B

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.

SECURITAS B

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SECURITAS B are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, SECURITAS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lamar Advertising and SECURITAS

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

The idea behind Lamar Advertising and SECURITAS B 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.