Correlation Between LB Foster and VARNO

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

By analyzing existing cross correlation between LB Foster and VARNO 8 15 NOV 32, you can compare the effects of market volatilities on LB Foster and VARNO 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 VARNO. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and VARNO.

Diversification Opportunities for LB Foster and VARNO

-0.64

Correlation Coefficient

LB Foster  VARNO

Excellent diversification

The 3 months correlation between FSTR and VARNO is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and VARNO 8 15 NOV 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VARNO 8 15 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 VARNO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VARNO 8 15 has no effect on the direction of LB Foster i.e., LB Foster and VARNO go up and down completely randomly.

Pair Corralation between LB Foster and VARNO

Given the investment horizon of 90 days LB Foster is expected to generate 2.3 times more return on investment than VARNO. However, LB Foster is 2.3 times more volatile than VARNO 8 15 NOV 32. It trades about 0.21 of its potential returns per unit of risk. VARNO 8 15 NOV 32 is currently generating about -0.16 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  873.00  from holding LB Foster or generate 43.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	78.13%
Values	Daily Returns

LB Foster  vs.  VARNO 8 15 NOV 32

LB Foster

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 16 (%) 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.

VARNO 8 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARNO 8 15 NOV 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for VARNO 8 15 NOV 32 investors.

Pair Trading with LB Foster and VARNO

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

The idea behind LB Foster and VARNO 8 15 NOV 32 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.