Correlation Between LB Foster and Broadleaf

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

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

Diversification Opportunities for LB Foster and Broadleaf

0.0

Correlation Coefficient

LB Foster  Broadleaf

Pay attention - limited upside

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

Pair Corralation between LB Foster and Broadleaf

Given the investment horizon of 90 days LB Foster is expected to generate 1.91 times less return on investment than Broadleaf. But when comparing it to its historical volatility, LB Foster is 1.56 times less risky than Broadleaf. It trades about 0.07 of its potential returns per unit of risk. Broadleaf Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  310.00  in Broadleaf Co on September 29, 2024 and sell it today you would earn a total of  198.00  from holding Broadleaf Co or generate 63.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

LB Foster  vs.  Broadleaf Co

LB Foster

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, LB Foster reported solid returns over the last few months and may actually be approaching a breakup point.

Broadleaf

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadleaf Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with LB Foster and Broadleaf

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

The idea behind LB Foster and Broadleaf Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.