Correlation Between LB Foster and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both LB Foster and Tower Semiconductor 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 Tower Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Tower Semiconductor, you can compare the effects of market volatilities on LB Foster and Tower Semiconductor 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 Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Tower Semiconductor.
Diversification Opportunities for LB Foster and Tower Semiconductor
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FSTR and Tower is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of LB Foster i.e., LB Foster and Tower Semiconductor go up and down completely randomly.
Pair Corralation between LB Foster and Tower Semiconductor
Given the investment horizon of 90 days LB Foster is expected to generate 1.11 times more return on investment than Tower Semiconductor. However, LB Foster is 1.11 times more volatile than Tower Semiconductor. It trades about 0.24 of its potential returns per unit of risk. Tower Semiconductor is currently generating about 0.07 per unit of risk. If you would invest 2,043 in LB Foster on August 30, 2024 and sell it today you would earn a total of 787.00 from holding LB Foster or generate 38.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
LB Foster vs. Tower Semiconductor
Performance |
| Timeline |
| LB Foster |
| Tower Semiconductor |
LB Foster and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Tower Semiconductor
The main advantage of trading using opposite LB Foster and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Tower Semiconductor 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 Tower Semiconductor will offset losses from the drop in Tower Semiconductor's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Tower Semiconductor vs. Nova | Tower Semiconductor vs. AudioCodes | Tower Semiconductor vs. Nice Ltd ADR | Tower Semiconductor vs. Elbit Systems |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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