Correlation Between Lamar Advertising and PACIFIC ONLINE

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

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

Diversification Opportunities for Lamar Advertising and PACIFIC ONLINE

0.0

Correlation Coefficient

Lamar Advertising  PACIFIC ONLINE

Pay attention - limited upside

The 3 months correlation between Lamar and PACIFIC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and PACIFIC ONLINE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACIFIC ONLINE 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 PACIFIC ONLINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACIFIC ONLINE has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and PACIFIC ONLINE go up and down completely randomly.

Pair Corralation between Lamar Advertising and PACIFIC ONLINE

Assuming the 90 days trading horizon Lamar Advertising is expected to generate 1.01 times less return on investment than PACIFIC ONLINE. But when comparing it to its historical volatility, Lamar Advertising is 1.37 times less risky than PACIFIC ONLINE. It trades about 0.06 of its potential returns per unit of risk. PACIFIC ONLINE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10.00  in PACIFIC ONLINE on September 3, 2024 and sell it today you would earn a total of  5.00  from holding PACIFIC ONLINE or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Lamar Advertising  vs.  PACIFIC ONLINE

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.

PACIFIC ONLINE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PACIFIC ONLINE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PACIFIC ONLINE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lamar Advertising and PACIFIC ONLINE

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

The idea behind Lamar Advertising and PACIFIC ONLINE 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.