Correlation Between LB Foster and United Airlines
Can any of the company-specific risk be diversified away by investing in both LB Foster and United Airlines 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 United Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and United Airlines Holdings, you can compare the effects of market volatilities on LB Foster and United Airlines 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and United Airlines.
Diversification Opportunities for LB Foster and United Airlines
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FSTR and United is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of LB Foster i.e., LB Foster and United Airlines go up and down completely randomly.
Pair Corralation between LB Foster and United Airlines
Given the investment horizon of 90 days LB Foster is expected to generate 1.08 times more return on investment than United Airlines. However, LB Foster is 1.08 times more volatile than United Airlines Holdings. It trades about 0.09 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.08 per unit of risk. If you would invest 1,029 in LB Foster on August 31, 2024 and sell it today you would earn a total of 1,844 from holding LB Foster or generate 179.2% 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. United Airlines Holdings
Performance |
| Timeline |
| LB Foster |
| United Airlines Holdings |
LB Foster and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and United Airlines
The main advantage of trading using opposite LB Foster and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| United Airlines vs. American Airlines Group | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways Corp | United Airlines vs. Delta Air Lines |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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