Correlation Between Transportadora and Lamar Advertising

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

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

Diversification Opportunities for Transportadora and Lamar Advertising

0.46

Correlation Coefficient

Transportadora  Lamar Advertising

Very weak diversification

The 3 months correlation between Transportadora and Lamar is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and Lamar Advertising go up and down completely randomly.

Pair Corralation between Transportadora and Lamar Advertising

Assuming the 90 days trading horizon Transportadora de Gas is expected to generate 3.13 times more return on investment than Lamar Advertising. However, Transportadora is 3.13 times more volatile than Lamar Advertising. It trades about 0.21 of its potential returns per unit of risk. Lamar Advertising is currently generating about 0.16 per unit of risk. If you would invest  1,710  in Transportadora de Gas on September 3, 2024 and sell it today you would earn a total of  1,150  from holding Transportadora de Gas or generate 67.25% return on investment over 90 days.

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

Transportadora de Gas  vs.  Lamar Advertising

Transportadora de Gas

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Transportadora reported solid returns over the last few months and may actually be approaching a breakup point.

Lamar Advertising

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lamar Advertising are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Lamar Advertising unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transportadora and Lamar Advertising

The main advantage of trading using opposite Transportadora and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.