Correlation Between LB Foster and Rave Restaurant
Can any of the company-specific risk be diversified away by investing in both LB Foster and Rave Restaurant 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 Rave Restaurant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Rave Restaurant Group, you can compare the effects of market volatilities on LB Foster and Rave Restaurant 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 Rave Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Rave Restaurant.
Diversification Opportunities for LB Foster and Rave Restaurant
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FSTR and Rave is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Rave Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rave Restaurant Group 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 Rave Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rave Restaurant Group has no effect on the direction of LB Foster i.e., LB Foster and Rave Restaurant go up and down completely randomly.
Pair Corralation between LB Foster and Rave Restaurant
Given the investment horizon of 90 days LB Foster is expected to generate 0.85 times more return on investment than Rave Restaurant. However, LB Foster is 1.17 times less risky than Rave Restaurant. It trades about 0.09 of its potential returns per unit of risk. Rave Restaurant Group is currently generating about 0.05 per unit of risk. If you would invest 1,400 in LB Foster on September 12, 2024 and sell it today you would earn a total of 1,462 from holding LB Foster or generate 104.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Foster vs. Rave Restaurant Group
Performance |
| Timeline |
| LB Foster |
| Rave Restaurant Group |
LB Foster and Rave Restaurant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Rave Restaurant
The main advantage of trading using opposite LB Foster and Rave Restaurant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Rave Restaurant 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 Rave Restaurant will offset losses from the drop in Rave Restaurant's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Rave Restaurant vs. Ark Restaurants Corp | Rave Restaurant vs. One Group Hospitality | Rave Restaurant vs. Flanigans Enterprises | Rave Restaurant vs. Noble Romans |
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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