Correlation Between LB Foster and Estee Lauder
Can any of the company-specific risk be diversified away by investing in both LB Foster and Estee Lauder 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 Estee Lauder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Estee Lauder Companies, you can compare the effects of market volatilities on LB Foster and Estee Lauder 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 Estee Lauder. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Estee Lauder.
Diversification Opportunities for LB Foster and Estee Lauder
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between FSTR and Estee is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Estee Lauder Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Estee Lauder Companies 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 Estee Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Estee Lauder Companies has no effect on the direction of LB Foster i.e., LB Foster and Estee Lauder go up and down completely randomly.
Pair Corralation between LB Foster and Estee Lauder
Given the investment horizon of 90 days LB Foster is expected to generate 1.3 times more return on investment than Estee Lauder. However, LB Foster is 1.3 times more volatile than Estee Lauder Companies. It trades about 0.03 of its potential returns per unit of risk. Estee Lauder Companies is currently generating about -0.13 per unit of risk. If you would invest 2,676 in LB Foster on September 2, 2024 and sell it today you would earn a total of 197.00 from holding LB Foster or generate 7.36% 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. Estee Lauder Companies
Performance |
| Timeline |
| LB Foster |
| Estee Lauder Companies |
LB Foster and Estee Lauder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Estee Lauder
The main advantage of trading using opposite LB Foster and Estee Lauder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Estee Lauder 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 Estee Lauder will offset losses from the drop in Estee Lauder's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Estee Lauder vs. Honest Company | Estee Lauder vs. Hims Hers Health | Estee Lauder vs. Procter Gamble | Estee Lauder vs. Coty Inc |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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