Correlation Between LB Foster and Diageo PLC
Can any of the company-specific risk be diversified away by investing in both LB Foster and Diageo PLC 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 Diageo PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Diageo PLC ADR, you can compare the effects of market volatilities on LB Foster and Diageo PLC 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 Diageo PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Diageo PLC.
Diversification Opportunities for LB Foster and Diageo PLC
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FSTR and Diageo is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Diageo PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diageo PLC ADR 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 Diageo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diageo PLC ADR has no effect on the direction of LB Foster i.e., LB Foster and Diageo PLC go up and down completely randomly.
Pair Corralation between LB Foster and Diageo PLC
Given the investment horizon of 90 days LB Foster is expected to generate 2.05 times more return on investment than Diageo PLC. However, LB Foster is 2.05 times more volatile than Diageo PLC ADR. It trades about 0.1 of its potential returns per unit of risk. Diageo PLC ADR is currently generating about -0.05 per unit of risk. If you would invest 932.00 in LB Foster on September 3, 2024 and sell it today you would earn a total of 1,941 from holding LB Foster or generate 208.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Foster vs. Diageo PLC ADR
Performance |
| Timeline |
| LB Foster |
| Diageo PLC ADR |
LB Foster and Diageo PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Diageo PLC
The main advantage of trading using opposite LB Foster and Diageo PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Diageo PLC 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 Diageo PLC will offset losses from the drop in Diageo PLC's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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