Correlation Between LB Foster and Ayala
Can any of the company-specific risk be diversified away by investing in both LB Foster and Ayala 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 Ayala into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Ayala, you can compare the effects of market volatilities on LB Foster and Ayala 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 Ayala. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Ayala.
Diversification Opportunities for LB Foster and Ayala
Poor diversification
The 3 months correlation between FSTR and Ayala is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Ayala in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ayala 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 Ayala. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ayala has no effect on the direction of LB Foster i.e., LB Foster and Ayala go up and down completely randomly.
Pair Corralation between LB Foster and Ayala
Given the investment horizon of 90 days LB Foster is expected to generate 1.03 times more return on investment than Ayala. However, LB Foster is 1.03 times more volatile than Ayala. It trades about 0.29 of its potential returns per unit of risk. Ayala is currently generating about 0.22 per unit of risk. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Foster vs. Ayala
Performance |
| Timeline |
| LB Foster |
| Ayala |
LB Foster and Ayala Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Ayala
The main advantage of trading using opposite LB Foster and Ayala positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Ayala 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 Ayala will offset losses from the drop in Ayala's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Ayala vs. Arca Continental SAB | Ayala vs. Becle SA de | Ayala vs. Aquagold International | Ayala vs. Morningstar Unconstrained Allocation |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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