Correlation Between SWISS WATER and Lamar Advertising

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

By analyzing existing cross correlation between SWISS WATER DECAFFCOFFEE and Lamar Advertising, you can compare the effects of market volatilities on SWISS WATER and Lamar Advertising 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 SWISS WATER with a short position of Lamar Advertising. Check out your portfolio center. Please also check ongoing floating volatility patterns of SWISS WATER and Lamar Advertising.

Diversification Opportunities for SWISS WATER and Lamar Advertising

0.49

Correlation Coefficient

SWISS WATER  Lamar Advertising

Very weak diversification

The 3 months correlation between SWISS and Lamar is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and SWISS WATER 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 SWISS WATER DECAFFCOFFEE are associated (or correlated) with Lamar Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lamar Advertising has no effect on the direction of SWISS WATER i.e., SWISS WATER and Lamar Advertising go up and down completely randomly.

Pair Corralation between SWISS WATER and Lamar Advertising

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 2.26 times more return on investment than Lamar Advertising. However, SWISS WATER is 2.26 times more volatile than Lamar Advertising. It trades about -0.06 of its potential returns per unit of risk. Lamar Advertising is currently generating about -0.2 per unit of risk. If you would invest  262.00  in SWISS WATER DECAFFCOFFEE on October 9, 2024 and sell it today you would lose (12.00) from holding SWISS WATER DECAFFCOFFEE or give up 4.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

SWISS WATER DECAFFCOFFEE  vs.  Lamar Advertising

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SWISS WATER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Lamar Advertising

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Lamar Advertising 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 SWISS WATER and Lamar Advertising

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

The idea behind SWISS WATER DECAFFCOFFEE and Lamar Advertising 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.