Correlation Between Lamar Advertising and Salesforce

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

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

Diversification Opportunities for Lamar Advertising and Salesforce

0.68

Correlation Coefficient

Lamar Advertising  Salesforce

Poor diversification

The 3 months correlation between Lamar and Salesforce is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Salesforce go up and down completely randomly.

Pair Corralation between Lamar Advertising and Salesforce

Assuming the 90 days trading horizon Lamar Advertising is expected to generate 4.61 times less return on investment than Salesforce. But when comparing it to its historical volatility, Lamar Advertising is 1.58 times less risky than Salesforce. It trades about 0.09 of its potential returns per unit of risk. Salesforce is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  26,870  in Salesforce on September 1, 2024 and sell it today you would earn a total of  4,535  from holding Salesforce or generate 16.88% return on investment over 90 days.

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

Lamar Advertising  vs.  Salesforce

Lamar Advertising

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lamar Advertising are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Lamar Advertising may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Salesforce

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lamar Advertising and Salesforce

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

The idea behind Lamar Advertising and Salesforce 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.