Correlation Between American Tower and Lamar Advertising

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

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

Diversification Opportunities for American Tower and Lamar Advertising

-0.06

Correlation Coefficient

American Tower  Lamar Advertising

Good diversification

The 3 months correlation between American and Lamar is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding American Tower Corp and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and American Tower 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 American Tower Corp 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 American Tower i.e., American Tower and Lamar Advertising go up and down completely randomly.

Pair Corralation between American Tower and Lamar Advertising

Considering the 90-day investment horizon American Tower Corp is expected to under-perform the Lamar Advertising. In addition to that, American Tower is 1.39 times more volatile than Lamar Advertising. It trades about -0.05 of its total potential returns per unit of risk. Lamar Advertising is currently generating about 0.1 per unit of volatility. If you would invest  12,442  in Lamar Advertising on August 30, 2024 and sell it today you would earn a total of  920.00  from holding Lamar Advertising or generate 7.39% return on investment over 90 days.

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

American Tower Corp  vs.  Lamar Advertising

American Tower Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lamar Advertising

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lamar Advertising are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Lamar Advertising may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with American Tower and Lamar Advertising

The main advantage of trading using opposite American Tower and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Tower 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 American Tower Corp 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.