Correlation Between Lion One and LB Foster

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

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

Diversification Opportunities for Lion One and LB Foster

-0.9

Correlation Coefficient

Lion One  LB Foster

Pay attention - limited upside

The 3 months correlation between Lion and FSTR is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Lion One Metals and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Lion One 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 Lion One Metals 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 Lion One i.e., Lion One and LB Foster go up and down completely randomly.

Pair Corralation between Lion One and LB Foster

Assuming the 90 days horizon Lion One Metals is expected to under-perform the LB Foster. In addition to that, Lion One is 1.03 times more volatile than LB Foster. It trades about -0.26 of its total potential returns per unit of risk. LB Foster is currently generating about 0.28 per unit of volatility. If you would invest  1,972  in LB Foster on September 19, 2024 and sell it today you would earn a total of  854.00  from holding LB Foster or generate 43.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Lion One Metals  vs.  LB Foster

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 weak basic indicators, LB Foster reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lion One and LB Foster

The main advantage of trading using opposite Lion One and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion One 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 Lion One Metals 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.