Correlation Between Grocery Outlet and LB Foster

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

By analyzing existing cross correlation between Grocery Outlet Holding and LB Foster, you can compare the effects of market volatilities on Grocery Outlet and LB Foster 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 Grocery Outlet with a short position of LB Foster. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grocery Outlet and LB Foster.

Diversification Opportunities for Grocery Outlet and LB Foster

0.76

Correlation Coefficient

Grocery Outlet  LB Foster

Poor diversification

The 3 months correlation between Grocery and FSTR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Grocery Outlet 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 Grocery Outlet Holding are associated (or correlated) with LB Foster. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LB Foster has no effect on the direction of Grocery Outlet i.e., Grocery Outlet and LB Foster go up and down completely randomly.

Pair Corralation between Grocery Outlet and LB Foster

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 1.84 times more return on investment than LB Foster. However, Grocery Outlet is 1.84 times more volatile than LB Foster. It trades about -0.04 of its potential returns per unit of risk. LB Foster is currently generating about -0.14 per unit of risk. If you would invest  1,598  in Grocery Outlet Holding on December 26, 2024 and sell it today you would lose (310.00) from holding Grocery Outlet Holding or give up 19.4% of portfolio value over 90 days.

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

Grocery Outlet Holding  vs.  LB Foster

Grocery Outlet Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

LB Foster

Risk-Adjusted Performance

Very Weak

Over the last 90 days LB Foster has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Grocery Outlet and LB Foster

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

The idea behind Grocery Outlet Holding and LB Foster 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..