Correlation Between INTERSHOP Communications and Lamar Advertising

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

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

Diversification Opportunities for INTERSHOP Communications and Lamar Advertising

0.32

Correlation Coefficient

INTERSHOP Communications  Lamar Advertising

Weak diversification

The 3 months correlation between INTERSHOP and Lamar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding INTERSHOP Communications Aktie and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft 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 INTERSHOP Communications i.e., INTERSHOP Communications and Lamar Advertising go up and down completely randomly.

Pair Corralation between INTERSHOP Communications and Lamar Advertising

Assuming the 90 days trading horizon INTERSHOP Communications Aktiengesellschaft is expected to generate 2.37 times more return on investment than Lamar Advertising. However, INTERSHOP Communications is 2.37 times more volatile than Lamar Advertising. It trades about -0.09 of its potential returns per unit of risk. Lamar Advertising is currently generating about -0.3 per unit of risk. If you would invest  190.00  in INTERSHOP Communications Aktiengesellschaft on October 9, 2024 and sell it today you would lose (8.00) from holding INTERSHOP Communications Aktiengesellschaft or give up 4.21% of portfolio value over 90 days.

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

INTERSHOP Communications Aktie  vs.  Lamar Advertising

INTERSHOP Communications

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, INTERSHOP Communications is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 rather sound basic indicators, Lamar Advertising is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with INTERSHOP Communications and Lamar Advertising

The main advantage of trading using opposite INTERSHOP Communications and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERSHOP Communications 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 INTERSHOP Communications Aktiengesellschaft 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.