Correlation Between LB Foster and Deckers Outdoor
Can any of the company-specific risk be diversified away by investing in both LB Foster and Deckers Outdoor 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 Deckers Outdoor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Deckers Outdoor, you can compare the effects of market volatilities on LB Foster and Deckers Outdoor 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 Deckers Outdoor. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Deckers Outdoor.
Diversification Opportunities for LB Foster and Deckers Outdoor
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FSTR and Deckers is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor 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 Deckers Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deckers Outdoor has no effect on the direction of LB Foster i.e., LB Foster and Deckers Outdoor go up and down completely randomly.
Pair Corralation between LB Foster and Deckers Outdoor
Given the investment horizon of 90 days LB Foster is expected to generate 1.65 times more return on investment than Deckers Outdoor. However, LB Foster is 1.65 times more volatile than Deckers Outdoor. It trades about 0.31 of its potential returns per unit of risk. Deckers Outdoor is currently generating about 0.4 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 491.00 from holding LB Foster or generate 20.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Foster vs. Deckers Outdoor
Performance |
| Timeline |
| LB Foster |
| Deckers Outdoor |
LB Foster and Deckers Outdoor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Deckers Outdoor
The main advantage of trading using opposite LB Foster and Deckers Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Deckers Outdoor 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 Deckers Outdoor will offset losses from the drop in Deckers Outdoor's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Deckers Outdoor vs. On Holding | Deckers Outdoor vs. Skechers USA | Deckers Outdoor vs. Nike Inc | Deckers Outdoor vs. Steven Madden |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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