Correlation Between Lamar Advertising and Valero Energy

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

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

Diversification Opportunities for Lamar Advertising and Valero Energy

0.58

Correlation Coefficient

Lamar Advertising  Valero Energy

Very weak diversification

The 3 months correlation between Lamar and Valero is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Valero Energy go up and down completely randomly.

Pair Corralation between Lamar Advertising and Valero Energy

Assuming the 90 days trading horizon Lamar Advertising is expected to under-perform the Valero Energy. But the stock apears to be less risky and, when comparing its historical volatility, Lamar Advertising is 1.29 times less risky than Valero Energy. The stock trades about -0.1 of its potential returns per unit of risk. The Valero Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,082  in Valero Energy on December 21, 2024 and sell it today you would earn a total of  1,132  from holding Valero Energy or generate 10.21% return on investment over 90 days.

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

Lamar Advertising  vs.  Valero Energy

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.

Valero Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Valero Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lamar Advertising and Valero Energy

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

The idea behind Lamar Advertising and Valero Energy 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.