Correlation Between Joint Stock and LB Foster

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

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

Diversification Opportunities for Joint Stock and LB Foster

-0.01

Correlation Coefficient

Joint Stock  LB Foster

Good diversification

The 3 months correlation between Joint and FSTR is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Joint Stock and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Joint Stock 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 Joint Stock 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 Joint Stock i.e., Joint Stock and LB Foster go up and down completely randomly.

Pair Corralation between Joint Stock and LB Foster

Given the investment horizon of 90 days Joint Stock is expected to under-perform the LB Foster. In addition to that, Joint Stock is 1.09 times more volatile than LB Foster. It trades about -0.04 of its total potential returns per unit of risk. LB Foster is currently generating about 0.2 per unit of volatility. If you would invest  2,041  in LB Foster on September 14, 2024 and sell it today you would earn a total of  818.00  from holding LB Foster or generate 40.08% return on investment over 90 days.

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

Joint Stock  vs.  LB Foster

Joint Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Joint Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

LB Foster

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 15 (%) 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 Joint Stock and LB Foster

The main advantage of trading using opposite Joint Stock and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Joint Stock 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 Joint Stock 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.