Correlation Between Guangshen Railway and LB Foster
Can any of the company-specific risk be diversified away by investing in both Guangshen Railway and LB Foster 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 Guangshen Railway and LB Foster into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangshen Railway and LB Foster, you can compare the effects of market volatilities on Guangshen Railway and LB Foster 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 Guangshen Railway with a short position of LB Foster. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangshen Railway and LB Foster.
Diversification Opportunities for Guangshen Railway and LB Foster
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Guangshen and FSTR is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Guangshen Railway and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Guangshen Railway 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 Guangshen Railway are associated (or correlated) with LB Foster. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LB Foster has no effect on the direction of Guangshen Railway i.e., Guangshen Railway and LB Foster go up and down completely randomly.
Pair Corralation between Guangshen Railway and LB Foster
Assuming the 90 days horizon Guangshen Railway is expected to generate 3.52 times more return on investment than LB Foster. However, Guangshen Railway is 3.52 times more volatile than LB Foster. It trades about 0.07 of its potential returns per unit of risk. LB Foster is currently generating about 0.06 per unit of risk. If you would invest 15.00 in Guangshen Railway on September 12, 2024 and sell it today you would earn a total of 9.00 from holding Guangshen Railway or generate 60.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 52.87% |
| Values | Daily Returns |
Guangshen Railway vs. LB Foster
Performance |
| Timeline |
| Guangshen Railway |
| LB Foster |
Guangshen Railway and LB Foster Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangshen Railway and LB Foster
The main advantage of trading using opposite Guangshen Railway and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangshen Railway position performs unexpectedly, LB Foster 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 LB Foster will offset losses from the drop in LB Foster's long position.| Guangshen Railway vs. Trinity Industries | Guangshen Railway vs. CSX Corporation | Guangshen Railway vs. Norfolk Southern | Guangshen Railway vs. Greenbrier Companies |
| LB Foster vs. Trinity Industries | LB Foster vs. Freightcar America | LB Foster vs. Westinghouse Air Brake | LB Foster vs. Norfolk Southern |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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