Correlation Between East Japan and LB Foster
Can any of the company-specific risk be diversified away by investing in both East Japan 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 East Japan and LB Foster into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Japan Railway and LB Foster, you can compare the effects of market volatilities on East Japan 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 East Japan with a short position of LB Foster. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Japan and LB Foster.
Diversification Opportunities for East Japan and LB Foster
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between East and FSTR is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding East Japan Railway and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and East Japan 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 East Japan Railway 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 East Japan i.e., East Japan and LB Foster go up and down completely randomly.
Pair Corralation between East Japan and LB Foster
Assuming the 90 days horizon East Japan Railway is expected to under-perform the LB Foster. But the pink sheet apears to be less risky and, when comparing its historical volatility, East Japan Railway is 2.38 times less risky than LB Foster. The pink sheet trades about -0.08 of its potential returns per unit of risk. The LB Foster is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 1,885 in LB Foster on September 1, 2024 and sell it today you would earn a total of 988.00 from holding LB Foster or generate 52.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
East Japan Railway vs. LB Foster
Performance |
| Timeline |
| East Japan Railway |
| LB Foster |
East Japan and LB Foster Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East Japan and LB Foster
The main advantage of trading using opposite East Japan and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Japan 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.| East Japan vs. Central Japan Railway | East Japan vs. LB Foster | East Japan vs. Canadian National Railway | East Japan vs. West Japan Railway |
| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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