Correlation Between Cass Information and Lamar Advertising

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

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

Diversification Opportunities for Cass Information and Lamar Advertising

0.18

Correlation Coefficient

Cass Information  Lamar Advertising

Average diversification

The 3 months correlation between Cass and Lamar is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cass Information Systems and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and Cass Information 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 Cass Information Systems 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 Cass Information i.e., Cass Information and Lamar Advertising go up and down completely randomly.

Pair Corralation between Cass Information and Lamar Advertising

Assuming the 90 days horizon Cass Information is expected to generate 23.75 times less return on investment than Lamar Advertising. In addition to that, Cass Information is 1.18 times more volatile than Lamar Advertising. It trades about 0.0 of its total potential returns per unit of risk. Lamar Advertising is currently generating about 0.05 per unit of volatility. If you would invest  8,592  in Lamar Advertising on October 22, 2024 and sell it today you would earn a total of  3,208  from holding Lamar Advertising or generate 37.34% return on investment over 90 days.

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

Cass Information Systems  vs.  Lamar Advertising

Cass Information Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cass Information Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Cass Information 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 Cass Information and Lamar Advertising

The main advantage of trading using opposite Cass Information and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cass Information 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 Cass Information Systems 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.