Correlation Between Eltek and LB Foster
Can any of the company-specific risk be diversified away by investing in both Eltek 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 Eltek and LB Foster into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eltek and LB Foster, you can compare the effects of market volatilities on Eltek 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 Eltek with a short position of LB Foster. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eltek and LB Foster.
Diversification Opportunities for Eltek and LB Foster
Very weak diversification
The 3 months correlation between Eltek and FSTR is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Eltek 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 Eltek 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 Eltek i.e., Eltek and LB Foster go up and down completely randomly.
Pair Corralation between Eltek and LB Foster
Given the investment horizon of 90 days Eltek is expected to generate 1.6 times more return on investment than LB Foster. However, Eltek is 1.6 times more volatile than LB Foster. It trades about 0.04 of its potential returns per unit of risk. LB Foster is currently generating about 0.06 per unit of risk. If you would invest 838.00 in Eltek on September 12, 2024 and sell it today you would earn a total of 276.00 from holding Eltek or generate 32.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eltek vs. LB Foster
Performance |
| Timeline |
| Eltek |
| LB Foster |
Eltek and LB Foster Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eltek and LB Foster
The main advantage of trading using opposite Eltek and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eltek 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.| Eltek vs. Methode Electronics | Eltek vs. OSI Systems | Eltek vs. Bel Fuse A | Eltek vs. Richardson Electronics |
| 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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