Correlation Between Lamar Advertising and Digital Realty

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

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

Diversification Opportunities for Lamar Advertising and Digital Realty

0.46

Correlation Coefficient

Lamar Advertising  Digital Realty

Very weak diversification

The 3 months correlation between Lamar and Digital is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Digital Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Realty Trust 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 Digital Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Realty Trust has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Digital Realty go up and down completely randomly.

Pair Corralation between Lamar Advertising and Digital Realty

Given the investment horizon of 90 days Lamar Advertising is expected to generate 0.8 times more return on investment than Digital Realty. However, Lamar Advertising is 1.25 times less risky than Digital Realty. It trades about -0.05 of its potential returns per unit of risk. Digital Realty Trust is currently generating about -0.14 per unit of risk. If you would invest  11,967  in Lamar Advertising on December 28, 2024 and sell it today you would lose (721.00) from holding Lamar Advertising or give up 6.02% 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.  Digital Realty Trust

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. Even with relatively invariable primary indicators, Lamar Advertising is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Digital Realty Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Lamar Advertising and Digital Realty

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

The idea behind Lamar Advertising and Digital Realty Trust 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.