Correlation Between Qualys and LB Foster

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

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

Diversification Opportunities for Qualys and LB Foster

0.85

Correlation Coefficient

Qualys  LB Foster

Very poor diversification

The 3 months correlation between Qualys and FSTR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Qualys Inc and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Qualys 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 Qualys Inc 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 Qualys i.e., Qualys and LB Foster go up and down completely randomly.

Pair Corralation between Qualys and LB Foster

Given the investment horizon of 90 days Qualys Inc is expected to under-perform the LB Foster. But the stock apears to be less risky and, when comparing its historical volatility, Qualys Inc is 1.59 times less risky than LB Foster. The stock trades about -0.36 of its potential returns per unit of risk. The LB Foster is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,832  in LB Foster on September 27, 2024 and sell it today you would lose (99.00) from holding LB Foster or give up 3.5% of portfolio value over 90 days.

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

Qualys Inc  vs.  LB Foster

Qualys Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qualys Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Qualys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

LB Foster

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 13 (%) 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 Qualys and LB Foster

The main advantage of trading using opposite Qualys and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qualys 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 Qualys Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.