Correlation Between LB Foster and Canadian National
Can any of the company-specific risk be diversified away by investing in both LB Foster and Canadian National 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 Canadian National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Canadian National Railway, you can compare the effects of market volatilities on LB Foster and Canadian National 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 Canadian National. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Canadian National.
Diversification Opportunities for LB Foster and Canadian National
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FSTR and Canadian is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Canadian National Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian National Railway 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 Canadian National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian National Railway has no effect on the direction of LB Foster i.e., LB Foster and Canadian National go up and down completely randomly.
Pair Corralation between LB Foster and Canadian National
Given the investment horizon of 90 days LB Foster is expected to generate 3.51 times more return on investment than Canadian National. However, LB Foster is 3.51 times more volatile than Canadian National Railway. It trades about 0.36 of its potential returns per unit of risk. Canadian National Railway is currently generating about -0.09 per unit of risk. If you would invest 1,963 in LB Foster on August 23, 2024 and sell it today you would earn a total of 764.00 from holding LB Foster or generate 38.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Foster vs. Canadian National Railway
Performance |
| Timeline |
| LB Foster |
| Canadian National Railway |
LB Foster and Canadian National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Canadian National
The main advantage of trading using opposite LB Foster and Canadian National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Canadian National 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 Canadian National will offset losses from the drop in Canadian National's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Canadian National vs. Union Pacific | Canadian National vs. CSX Corporation | Canadian National vs. Norfolk Southern | Canadian National vs. Westinghouse Air Brake |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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