Correlation Between LB Foster and MTR Corp
Can any of the company-specific risk be diversified away by investing in both LB Foster and MTR Corp 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 MTR Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and MTR Corp, you can compare the effects of market volatilities on LB Foster and MTR Corp 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 MTR Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and MTR Corp.
Diversification Opportunities for LB Foster and MTR Corp
Significant diversification
The 3 months correlation between FSTR and MTR is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and MTR Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTR Corp 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 MTR Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTR Corp has no effect on the direction of LB Foster i.e., LB Foster and MTR Corp go up and down completely randomly.
Pair Corralation between LB Foster and MTR Corp
Given the investment horizon of 90 days LB Foster is expected to generate 1.62 times more return on investment than MTR Corp. However, LB Foster is 1.62 times more volatile than MTR Corp. It trades about 0.4 of its potential returns per unit of risk. MTR Corp is currently generating about -0.21 per unit of risk. If you would invest 1,980 in LB Foster on August 29, 2024 and sell it today you would earn a total of 852.00 from holding LB Foster or generate 43.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Foster vs. MTR Corp
Performance |
| Timeline |
| LB Foster |
| MTR Corp |
LB Foster and MTR Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and MTR Corp
The main advantage of trading using opposite LB Foster and MTR Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, MTR Corp 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 MTR Corp will offset losses from the drop in MTR Corp's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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