Correlation Between LB Foster and Virco Manufacturing
Can any of the company-specific risk be diversified away by investing in both LB Foster and Virco Manufacturing 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 Virco Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and Virco Manufacturing, you can compare the effects of market volatilities on LB Foster and Virco Manufacturing 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 Virco Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and Virco Manufacturing.
Diversification Opportunities for LB Foster and Virco Manufacturing
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FSTR and Virco is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Virco Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virco Manufacturing 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 Virco Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virco Manufacturing has no effect on the direction of LB Foster i.e., LB Foster and Virco Manufacturing go up and down completely randomly.
Pair Corralation between LB Foster and Virco Manufacturing
Given the investment horizon of 90 days LB Foster is expected to generate 1.13 times more return on investment than Virco Manufacturing. However, LB Foster is 1.13 times more volatile than Virco Manufacturing. It trades about 0.41 of its potential returns per unit of risk. Virco Manufacturing is currently generating about 0.2 per unit of risk. If you would invest 1,968 in LB Foster on August 31, 2024 and sell it today you would earn a total of 862.00 from holding LB Foster or generate 43.8% 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. Virco Manufacturing
Performance |
| Timeline |
| LB Foster |
| Virco Manufacturing |
LB Foster and Virco Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and Virco Manufacturing
The main advantage of trading using opposite LB Foster and Virco Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, Virco Manufacturing 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 Virco Manufacturing will offset losses from the drop in Virco Manufacturing's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| Virco Manufacturing vs. Bassett Furniture Industries | Virco Manufacturing vs. Hooker Furniture | Virco Manufacturing vs. Natuzzi SpA | Virco Manufacturing vs. Flexsteel Industries |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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