Correlation Between GPT and Lamar Advertising

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

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

Diversification Opportunities for GPT and Lamar Advertising

-0.07

Correlation Coefficient

GPT  Lamar Advertising

Good diversification

The 3 months correlation between GPT and Lamar is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding GPT Group and Lamar Advertising in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lamar Advertising and GPT 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 GPT Group 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 GPT i.e., GPT and Lamar Advertising go up and down completely randomly.

Pair Corralation between GPT and Lamar Advertising

Assuming the 90 days horizon GPT Group is expected to under-perform the Lamar Advertising. In addition to that, GPT is 1.75 times more volatile than Lamar Advertising. It trades about -0.07 of its total potential returns per unit of risk. Lamar Advertising is currently generating about 0.0 per unit of volatility. If you would invest  11,762  in Lamar Advertising on September 23, 2024 and sell it today you would lose (62.00) from holding Lamar Advertising or give up 0.53% of portfolio value over 90 days.

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

GPT Group  vs.  Lamar Advertising

GPT Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GPT Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. Despite nearly stable basic indicators, Lamar Advertising is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GPT and Lamar Advertising

The main advantage of trading using opposite GPT and Lamar Advertising positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GPT 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 GPT Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.