Correlation Between Lamar Advertising and Anhui Expressway

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

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

Diversification Opportunities for Lamar Advertising and Anhui Expressway

0.25

Correlation Coefficient

Lamar Advertising  Anhui Expressway

Modest diversification

The 3 months correlation between Lamar and Anhui is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Anhui Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Expressway 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 Anhui Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Expressway has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Anhui Expressway go up and down completely randomly.

Pair Corralation between Lamar Advertising and Anhui Expressway

Assuming the 90 days trading horizon Lamar Advertising is expected to under-perform the Anhui Expressway. But the stock apears to be less risky and, when comparing its historical volatility, Lamar Advertising is 1.25 times less risky than Anhui Expressway. The stock trades about -0.11 of its potential returns per unit of risk. The Anhui Expressway is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  125.00  in Anhui Expressway on December 20, 2024 and sell it today you would lose (5.00) from holding Anhui Expressway or give up 4.0% of portfolio value over 90 days.

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

Lamar Advertising  vs.  Anhui Expressway

Lamar Advertising

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Anhui Expressway

Risk-Adjusted Performance

Weak

Over the last 90 days Anhui Expressway has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Anhui Expressway 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 Anhui Expressway

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

The idea behind Lamar Advertising and Anhui Expressway 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.