Correlation Between Lamar Advertising and ALGOMA STEEL

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

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

Diversification Opportunities for Lamar Advertising and ALGOMA STEEL

0.19

Correlation Coefficient

Lamar Advertising  ALGOMA STEEL

Average diversification

The 3 months correlation between Lamar and ALGOMA is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and ALGOMA STEEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALGOMA STEEL GROUP 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 ALGOMA STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALGOMA STEEL GROUP has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and ALGOMA STEEL go up and down completely randomly.

Pair Corralation between Lamar Advertising and ALGOMA STEEL

Assuming the 90 days trading horizon Lamar Advertising is expected to under-perform the ALGOMA STEEL. But the stock apears to be less risky and, when comparing its historical volatility, Lamar Advertising is 1.96 times less risky than ALGOMA STEEL. The stock trades about -0.03 of its potential returns per unit of risk. The ALGOMA STEEL GROUP is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  901.00  in ALGOMA STEEL GROUP on October 10, 2024 and sell it today you would earn a total of  29.00  from holding ALGOMA STEEL GROUP or generate 3.22% 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.  ALGOMA STEEL GROUP

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

ALGOMA STEEL GROUP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALGOMA STEEL GROUP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ALGOMA STEEL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lamar Advertising and ALGOMA STEEL

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

The idea behind Lamar Advertising and ALGOMA STEEL GROUP 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.