Correlation Between LB Foster and Aurania Resources
Can any of the company-specific risk be diversified away by investing in both LB Foster and Aurania Resources 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 LB Foster and Aurania Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Aurania Resources, you can compare the effects of market volatilities on LB Foster and Aurania Resources 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 LB Foster with a short position of Aurania Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Aurania Resources.
Diversification Opportunities for LB Foster and Aurania Resources
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FSTR and Aurania is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Aurania Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurania Resources and LB Foster 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 LB Foster are associated (or correlated) with Aurania Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurania Resources has no effect on the direction of LB Foster i.e., LB Foster and Aurania Resources go up and down completely randomly.
Pair Corralation between LB Foster and Aurania Resources
Given the investment horizon of 90 days LB Foster is expected to generate 1.2 times less return on investment than Aurania Resources. But when comparing it to its historical volatility, LB Foster is 3.0 times less risky than Aurania Resources. It trades about 0.1 of its potential returns per unit of risk. Aurania Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 32.00 in Aurania Resources on September 12, 2024 and sell it today you would lose (1.00) from holding Aurania Resources or give up 3.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
LB Foster vs. Aurania Resources
Performance |
| Timeline |
| LB Foster |
| Aurania Resources |
LB Foster and Aurania Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Aurania Resources
The main advantage of trading using opposite LB Foster and Aurania Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Aurania Resources 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 Aurania Resources will offset losses from the drop in Aurania Resources' long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Aurania Resources vs. Gold79 Mines | Aurania Resources vs. Arctic Star Exploration | Aurania Resources vs. Arras Minerals Corp | Aurania Resources vs. American Creek Resources |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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