Correlation Between LB Foster and Monument Circle

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

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

Diversification Opportunities for LB Foster and Monument Circle

-0.32

Correlation Coefficient

LB Foster  Monument Circle

Very good diversification

The 3 months correlation between FSTR and Monument is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Monument Circle Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Circle Acqu 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 Monument Circle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Circle Acqu has no effect on the direction of LB Foster i.e., LB Foster and Monument Circle go up and down completely randomly.

Pair Corralation between LB Foster and Monument Circle

If you would invest (100.00) in Monument Circle Acquisition on October 10, 2024 and sell it today you would earn a total of  100.00  from holding Monument Circle Acquisition or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

LB Foster  vs.  Monument Circle Acquisition

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.

Monument Circle Acqu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monument Circle Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Monument Circle is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with LB Foster and Monument Circle

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

The idea behind LB Foster and Monument Circle Acquisition 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.