Correlation Between Lamar Advertising and Covivio SA

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

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

Diversification Opportunities for Lamar Advertising and Covivio SA

-0.23

Correlation Coefficient

Lamar Advertising  Covivio SA

Very good diversification

The 3 months correlation between Lamar and Covivio is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Covivio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covivio SA 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 Covivio SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covivio SA has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Covivio SA go up and down completely randomly.

Pair Corralation between Lamar Advertising and Covivio SA

Assuming the 90 days horizon Lamar Advertising is expected to generate 0.72 times more return on investment than Covivio SA. However, Lamar Advertising is 1.4 times less risky than Covivio SA. It trades about -0.18 of its potential returns per unit of risk. Covivio SA is currently generating about -0.17 per unit of risk. If you would invest  12,175  in Lamar Advertising on September 22, 2024 and sell it today you would lose (475.00) from holding Lamar Advertising or give up 3.9% of portfolio value over 90 days.

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

Lamar Advertising  vs.  Covivio SA

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. Despite nearly stable basic indicators, Lamar Advertising is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Covivio SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Covivio SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lamar Advertising and Covivio SA

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

The idea behind Lamar Advertising and Covivio SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.