Correlation Between Lamar Advertising and Nike

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

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

Diversification Opportunities for Lamar Advertising and Nike

0.28

Correlation Coefficient

Lamar Advertising  Nike

Modest diversification

The 3 months correlation between Lamar and Nike is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Nike go up and down completely randomly.

Pair Corralation between Lamar Advertising and Nike

Assuming the 90 days trading horizon Lamar Advertising is expected to under-perform the Nike. But the stock apears to be less risky and, when comparing its historical volatility, Lamar Advertising is 1.09 times less risky than Nike. The stock trades about -0.09 of its potential returns per unit of risk. The Nike Inc is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  7,272  in Nike Inc on December 20, 2024 and sell it today you would lose (586.00) from holding Nike Inc or give up 8.06% 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.  Nike Inc

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 unsteady 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.

Nike Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Lamar Advertising and Nike

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

The idea behind Lamar Advertising and Nike Inc 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.