Correlation Between LB Foster and Employers Holdings
Can any of the company-specific risk be diversified away by investing in both LB Foster and Employers Holdings 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 Employers Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Employers Holdings, you can compare the effects of market volatilities on LB Foster and Employers Holdings 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 Employers Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Employers Holdings.
Diversification Opportunities for LB Foster and Employers Holdings
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FSTR and Employers is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Employers Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Employers Holdings 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 Employers Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Employers Holdings has no effect on the direction of LB Foster i.e., LB Foster and Employers Holdings go up and down completely randomly.
Pair Corralation between LB Foster and Employers Holdings
Given the investment horizon of 90 days LB Foster is expected to generate 2.2 times more return on investment than Employers Holdings. However, LB Foster is 2.2 times more volatile than Employers Holdings. It trades about 0.06 of its potential returns per unit of risk. Employers Holdings is currently generating about 0.08 per unit of risk. If you would invest 1,940 in LB Foster on September 12, 2024 and sell it today you would earn a total of 1,010 from holding LB Foster or generate 52.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Foster vs. Employers Holdings
Performance |
| Timeline |
| LB Foster |
| Employers Holdings |
LB Foster and Employers Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Employers Holdings
The main advantage of trading using opposite LB Foster and Employers Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Employers Holdings 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 Employers Holdings will offset losses from the drop in Employers Holdings' long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Employers Holdings vs. First American | Employers Holdings vs. Assurant | Employers Holdings vs. NMI Holdings | Employers Holdings vs. MGIC Investment Corp |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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