Correlation Between Yuexiu Transport and LB Foster

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

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

Diversification Opportunities for Yuexiu Transport and LB Foster

0.81

Correlation Coefficient

Yuexiu Transport  LB Foster

Very poor diversification

The 3 months correlation between Yuexiu and FSTR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Yuexiu Transport Infrastructur and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Yuexiu Transport 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 Yuexiu Transport Infrastructure 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 Yuexiu Transport i.e., Yuexiu Transport and LB Foster go up and down completely randomly.

Pair Corralation between Yuexiu Transport and LB Foster

Assuming the 90 days horizon Yuexiu Transport Infrastructure is expected to generate 1.03 times more return on investment than LB Foster. However, Yuexiu Transport is 1.03 times more volatile than LB Foster. It trades about 0.09 of its potential returns per unit of risk. LB Foster is currently generating about 0.09 per unit of risk. If you would invest  19.00  in Yuexiu Transport Infrastructure on September 20, 2024 and sell it today you would earn a total of  39.00  from holding Yuexiu Transport Infrastructure or generate 205.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Yuexiu Transport Infrastructur  vs.  LB Foster

Yuexiu Transport Inf

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Yuexiu Transport Infrastructure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Yuexiu Transport reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Yuexiu Transport and LB Foster

The main advantage of trading using opposite Yuexiu Transport and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yuexiu Transport 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 Yuexiu Transport Infrastructure 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.