Correlation Between LB Foster and Sanyo Special

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

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

Diversification Opportunities for LB Foster and Sanyo Special

0.36

Correlation Coefficient

LB Foster  Sanyo Special

Weak diversification

The 3 months correlation between FSTR and Sanyo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Sanyo Special Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanyo Special Steel 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 Sanyo Special. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanyo Special Steel has no effect on the direction of LB Foster i.e., LB Foster and Sanyo Special go up and down completely randomly.

Pair Corralation between LB Foster and Sanyo Special

Given the investment horizon of 90 days LB Foster is expected to generate 69.41 times more return on investment than Sanyo Special. However, LB Foster is 69.41 times more volatile than Sanyo Special Steel. It trades about 0.07 of its potential returns per unit of risk. Sanyo Special Steel is currently generating about 0.06 per unit of risk. If you would invest  1,940  in LB Foster on September 13, 2024 and sell it today you would earn a total of  967.00  from holding LB Foster or generate 49.85% return on investment over 90 days.

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

LB Foster  vs.  Sanyo Special Steel

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.

Sanyo Special Steel

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sanyo Special Steel are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Sanyo Special is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LB Foster and Sanyo Special

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

The idea behind LB Foster and Sanyo Special Steel 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.