Correlation Between Lamar Advertising and Rayonier

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

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

Diversification Opportunities for Lamar Advertising and Rayonier

0.77

Correlation Coefficient

Lamar Advertising  Rayonier

Poor diversification

The 3 months correlation between Lamar and Rayonier is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lamar Advertising and Rayonier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rayonier 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 Rayonier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rayonier has no effect on the direction of Lamar Advertising i.e., Lamar Advertising and Rayonier go up and down completely randomly.

Pair Corralation between Lamar Advertising and Rayonier

Given the investment horizon of 90 days Lamar Advertising is expected to generate 0.79 times more return on investment than Rayonier. However, Lamar Advertising is 1.26 times less risky than Rayonier. It trades about -0.14 of its potential returns per unit of risk. Rayonier is currently generating about -0.21 per unit of risk. If you would invest  12,761  in Lamar Advertising on September 22, 2024 and sell it today you would lose (462.00) from holding Lamar Advertising or give up 3.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Lamar Advertising  vs.  Rayonier

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. Even with latest weak performance, the Stock's primary indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Rayonier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rayonier has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Lamar Advertising and Rayonier

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

The idea behind Lamar Advertising and Rayonier 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.