Correlation Between Lamar Advertising and INTERSHOP Communications

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

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

Diversification Opportunities for Lamar Advertising and INTERSHOP Communications

-0.11

Correlation Coefficient

Lamar Advertising  INTERSHOP Communications

Good diversification

The 3 months correlation between Lamar and INTERSHOP is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications 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 INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between Lamar Advertising and INTERSHOP Communications

Assuming the 90 days trading horizon Lamar Advertising is expected to under-perform the INTERSHOP Communications. But the stock apears to be less risky and, when comparing its historical volatility, Lamar Advertising is 2.01 times less risky than INTERSHOP Communications. The stock trades about -0.11 of its potential returns per unit of risk. The INTERSHOP Communications Aktiengesellschaft is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  175.00  in INTERSHOP Communications Aktiengesellschaft on December 24, 2024 and sell it today you would earn a total of  18.00  from holding INTERSHOP Communications Aktiengesellschaft or generate 10.29% return on investment over 90 days.

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

Lamar Advertising  vs.  INTERSHOP Communications Aktie

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 uncertain 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.

INTERSHOP Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, INTERSHOP Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lamar Advertising and INTERSHOP Communications

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

The idea behind Lamar Advertising and INTERSHOP Communications Aktiengesellschaft 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..