Correlation Between LB Foster and West Red
Can any of the company-specific risk be diversified away by investing in both LB Foster and West Red 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 West Red into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LB Foster and West Red Lake, you can compare the effects of market volatilities on LB Foster and West Red 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 West Red. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and West Red.
Diversification Opportunities for LB Foster and West Red
Very good diversification
The 3 months correlation between FSTR and West is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and West Red Lake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Red Lake 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 West Red. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Red Lake has no effect on the direction of LB Foster i.e., LB Foster and West Red go up and down completely randomly.
Pair Corralation between LB Foster and West Red
Given the investment horizon of 90 days LB Foster is expected to generate 4.14 times less return on investment than West Red. In addition to that, LB Foster is 1.05 times more volatile than West Red Lake. It trades about 0.03 of its total potential returns per unit of risk. West Red Lake is currently generating about 0.15 per unit of volatility. If you would invest 41.00 in West Red Lake on November 4, 2024 and sell it today you would earn a total of 3.00 from holding West Red Lake or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
LB Foster vs. West Red Lake
Performance |
| Timeline |
| LB Foster |
| West Red Lake |
LB Foster and West Red Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LB Foster and West Red
The main advantage of trading using opposite LB Foster and West Red positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, West Red 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 West Red will offset losses from the drop in West Red's long position.| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
| West Red vs. Universal Technical Institute | West Red vs. Scholastic | West Red vs. Graham Holdings Co | West Red vs. Zane Interactive Publishing |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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