Correlation Between Lamar Advertising and Scientific Games

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

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

Diversification Opportunities for Lamar Advertising and Scientific Games

0.59

Correlation Coefficient

Lamar Advertising  Scientific Games

Very weak diversification

The 3 months correlation between Lamar and Scientific is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games 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 Scientific Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Games has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Scientific Games go up and down completely randomly.

Pair Corralation between Lamar Advertising and Scientific Games

Assuming the 90 days trading horizon Lamar Advertising is expected to generate 1.23 times less return on investment than Scientific Games. But when comparing it to its historical volatility, Lamar Advertising is 1.4 times less risky than Scientific Games. It trades about 0.05 of its potential returns per unit of risk. Scientific Games is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,650  in Scientific Games on October 11, 2024 and sell it today you would earn a total of  2,500  from holding Scientific Games or generate 44.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Lamar Advertising  vs.  Scientific Games

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.

Scientific Games

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scientific Games has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Scientific Games is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lamar Advertising and Scientific Games

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

The idea behind Lamar Advertising and Scientific Games 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.