Correlation Between LB Foster and Western

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

By analyzing existing cross correlation between LB Foster and Western Digital 475, you can compare the effects of market volatilities on LB Foster and Western 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 Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Western.

Diversification Opportunities for LB Foster and Western

-0.28

Correlation Coefficient

LB Foster  Western

Very good diversification

The 3 months correlation between FSTR and Western is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Western Digital 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 475 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 Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital 475 has no effect on the direction of LB Foster i.e., LB Foster and Western go up and down completely randomly.

Pair Corralation between LB Foster and Western

Given the investment horizon of 90 days LB Foster is expected to generate 1.3 times more return on investment than Western. However, LB Foster is 1.3 times more volatile than Western Digital 475. It trades about -0.08 of its potential returns per unit of risk. Western Digital 475 is currently generating about -0.23 per unit of risk. If you would invest  2,830  in LB Foster on September 28, 2024 and sell it today you would lose (103.00) from holding LB Foster or give up 3.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

LB Foster  vs.  Western Digital 475

LB Foster

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, LB Foster reported solid returns over the last few months and may actually be approaching a breakup point.

Western Digital 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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 Western Digital 475 investors.

Pair Trading with LB Foster and Western

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

The idea behind LB Foster and Western Digital 475 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.