Correlation Between Employers Holdings and LB Foster
Can any of the company-specific risk be diversified away by investing in both Employers Holdings 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 Employers Holdings and LB Foster into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Employers Holdings and LB Foster, you can compare the effects of market volatilities on Employers Holdings 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 Employers Holdings with a short position of LB Foster. Check out your portfolio center. Please also check ongoing floating volatility patterns of Employers Holdings and LB Foster.
Diversification Opportunities for Employers Holdings and LB Foster
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Employers and FSTR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Employers Holdings and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Employers Holdings 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 Employers Holdings 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 Employers Holdings i.e., Employers Holdings and LB Foster go up and down completely randomly.
Pair Corralation between Employers Holdings and LB Foster
Considering the 90-day investment horizon Employers Holdings is expected to under-perform the LB Foster. But the stock apears to be less risky and, when comparing its historical volatility, Employers Holdings is 4.1 times less risky than LB Foster. The stock trades about -0.21 of its potential returns per unit of risk. The LB Foster is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,416 in LB Foster on September 12, 2024 and sell it today you would earn a total of 446.00 from holding LB Foster or generate 18.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Employers Holdings vs. LB Foster
Performance |
| Timeline |
| Employers Holdings |
| LB Foster |
Employers Holdings and LB Foster Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Employers Holdings and LB Foster
The main advantage of trading using opposite Employers Holdings and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Employers Holdings 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.| Employers Holdings vs. First American | Employers Holdings vs. Assurant | Employers Holdings vs. NMI Holdings | Employers Holdings vs. MGIC Investment Corp |
| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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