Correlation Between Lamar Advertising and Vonovia SE

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

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

Diversification Opportunities for Lamar Advertising and Vonovia SE

0.58

Correlation Coefficient

Lamar Advertising  Vonovia SE

Very weak diversification

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

Pair Corralation between Lamar Advertising and Vonovia SE

Assuming the 90 days trading horizon Lamar Advertising is expected to under-perform the Vonovia SE. But the stock apears to be less risky and, when comparing its historical volatility, Lamar Advertising is 1.1 times less risky than Vonovia SE. The stock trades about -0.08 of its potential returns per unit of risk. The Vonovia SE is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,148  in Vonovia SE on December 2, 2024 and sell it today you would lose (153.00) from holding Vonovia SE or give up 4.86% of portfolio value over 90 days.

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

Lamar Advertising  vs.  Vonovia SE

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.

Vonovia SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vonovia SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vonovia SE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lamar Advertising and Vonovia SE

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

The idea behind Lamar Advertising and Vonovia SE 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.