Correlation Between Broadleaf and LB Foster

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

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

Diversification Opportunities for Broadleaf and LB Foster

0.19

Correlation Coefficient

Broadleaf  LB Foster

Average diversification

The 3 months correlation between Broadleaf and FSTR is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Broadleaf Co and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Broadleaf 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 Broadleaf Co are associated (or correlated) with LB Foster. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LB Foster has no effect on the direction of Broadleaf i.e., Broadleaf and LB Foster go up and down completely randomly.

Pair Corralation between Broadleaf and LB Foster

Assuming the 90 days horizon Broadleaf is expected to generate 10.51 times less return on investment than LB Foster. But when comparing it to its historical volatility, Broadleaf Co is 67.24 times less risky than LB Foster. It trades about 0.16 of its potential returns per unit of risk. LB Foster is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,584  in LB Foster on October 17, 2024 and sell it today you would earn a total of  31.00  from holding LB Foster or generate 1.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.44%
Values	Daily Returns

Broadleaf Co  vs.  LB Foster

Broadleaf

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Broadleaf Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Broadleaf is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

LB Foster

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, LB Foster reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Broadleaf and LB Foster

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

The idea behind Broadleaf Co and LB Foster 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.