Correlation Between Falcons Beyond and LB Foster

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

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

Diversification Opportunities for Falcons Beyond and LB Foster

-0.67

Correlation Coefficient

Falcons Beyond  LB Foster

Excellent diversification

The 3 months correlation between Falcons and FSTR is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Falcons Beyond Global, and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Falcons Beyond 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 Falcons Beyond Global, 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 Falcons Beyond i.e., Falcons Beyond and LB Foster go up and down completely randomly.

Pair Corralation between Falcons Beyond and LB Foster

Assuming the 90 days horizon Falcons Beyond Global, is expected to generate 6.98 times more return on investment than LB Foster. However, Falcons Beyond is 6.98 times more volatile than LB Foster. It trades about 0.09 of its potential returns per unit of risk. LB Foster is currently generating about 0.05 per unit of risk. If you would invest  46.00  in Falcons Beyond Global, on October 3, 2024 and sell it today you would earn a total of  45.00  from holding Falcons Beyond Global, or generate 97.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	76.03%
Values	Daily Returns

Falcons Beyond Global,  vs.  LB Foster

Falcons Beyond Global,

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Falcons Beyond Global, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak fundamental indicators, Falcons Beyond showed solid returns over the last few months and may actually be approaching a breakup point.

LB Foster

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, LB Foster reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Falcons Beyond and LB Foster

The main advantage of trading using opposite Falcons Beyond and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Falcons Beyond 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 Falcons Beyond Global, 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.