Correlation Between LB Foster and CITIC

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

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

Diversification Opportunities for LB Foster and CITIC

-0.52

Correlation Coefficient

LB Foster  CITIC

Excellent diversification

The 3 months correlation between FSTR and CITIC is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of LB Foster i.e., LB Foster and CITIC go up and down completely randomly.

Pair Corralation between LB Foster and CITIC

Given the investment horizon of 90 days LB Foster is expected to generate 1.11 times more return on investment than CITIC. However, LB Foster is 1.11 times more volatile than CITIC Limited. It trades about -0.02 of its potential returns per unit of risk. CITIC Limited is currently generating about -0.22 per unit of risk. If you would invest  2,789  in LB Foster on December 1, 2024 and sell it today you would lose (44.00) from holding LB Foster or give up 1.58% of portfolio value over 90 days.

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

LB Foster  vs.  CITIC Limited

LB Foster

Risk-Adjusted Performance

Very Weak

Over the last 90 days LB Foster has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, LB Foster is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

CITIC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITIC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LB Foster and CITIC

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

The idea behind LB Foster and CITIC Limited 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.