Correlation Between LB Foster and Flex

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

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

Diversification Opportunities for LB Foster and Flex

0.82

Correlation Coefficient

LB Foster  Flex

Very poor diversification

The 3 months correlation between FSTR and Flex is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Flex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex 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 Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex has no effect on the direction of LB Foster i.e., LB Foster and Flex go up and down completely randomly.

Pair Corralation between LB Foster and Flex

Given the investment horizon of 90 days LB Foster is expected to under-perform the Flex. But the stock apears to be less risky and, when comparing its historical volatility, LB Foster is 1.01 times less risky than Flex. The stock trades about -0.13 of its potential returns per unit of risk. The Flex is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,912  in Flex on December 27, 2024 and sell it today you would lose (375.00) from holding Flex or give up 9.59% of portfolio value over 90 days.

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

LB Foster  vs.  Flex

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 unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Flex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with LB Foster and Flex

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

The idea behind LB Foster and Flex 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.