Correlation Between LB Foster and Kite Realty

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

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

Diversification Opportunities for LB Foster and Kite Realty

0.73

Correlation Coefficient

LB Foster  Kite Realty

Poor diversification

The 3 months correlation between FSTR and Kite is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Kite Realty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kite Realty Group 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 Kite Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kite Realty Group has no effect on the direction of LB Foster i.e., LB Foster and Kite Realty go up and down completely randomly.

Pair Corralation between LB Foster and Kite Realty

Given the investment horizon of 90 days LB Foster is expected to generate 2.93 times more return on investment than Kite Realty. However, LB Foster is 2.93 times more volatile than Kite Realty Group. It trades about 0.22 of its potential returns per unit of risk. Kite Realty Group is currently generating about -0.01 per unit of risk. If you would invest  1,986  in LB Foster on September 13, 2024 and sell it today you would earn a total of  921.00  from holding LB Foster or generate 46.37% return on investment over 90 days.

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

LB Foster  vs.  Kite Realty Group

LB Foster

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 17 (%) 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.

Kite Realty Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kite Realty Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kite Realty 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 Kite Realty

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

The idea behind LB Foster and Kite Realty Group 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 Anywhere module to track or share privately all of your investments from the convenience of any device.