Correlation Between LB Foster and Cumulus Media

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

By analyzing existing cross correlation between LB Foster and Cumulus Media Class, you can compare the effects of market volatilities on LB Foster and Cumulus Media 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 Cumulus Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Cumulus Media.

Diversification Opportunities for LB Foster and Cumulus Media

-0.83

Correlation Coefficient

LB Foster  Cumulus Media

Pay attention - limited upside

The 3 months correlation between FSTR and Cumulus is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Cumulus Media Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumulus Media Class 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 Cumulus Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumulus Media Class has no effect on the direction of LB Foster i.e., LB Foster and Cumulus Media go up and down completely randomly.

Pair Corralation between LB Foster and Cumulus Media

Given the investment horizon of 90 days LB Foster is expected to generate 0.75 times more return on investment than Cumulus Media. However, LB Foster is 1.34 times less risky than Cumulus Media. It trades about 0.25 of its potential returns per unit of risk. Cumulus Media Class is currently generating about -0.04 per unit of risk. If you would invest  1,962  in LB Foster on October 6, 2024 and sell it today you would earn a total of  789.00  from holding LB Foster or generate 40.21% return on investment over 90 days.

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

LB Foster  vs.  Cumulus Media Class

LB Foster

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 14 (%) 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.

Cumulus Media Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cumulus Media Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with LB Foster and Cumulus Media

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

The idea behind LB Foster and Cumulus Media Class 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.