Correlation Between Lincoln Educational and LB Foster
Can any of the company-specific risk be diversified away by investing in both Lincoln Educational 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 Lincoln Educational and LB Foster into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lincoln Educational Services and LB Foster, you can compare the effects of market volatilities on Lincoln Educational 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 Lincoln Educational with a short position of LB Foster. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lincoln Educational and LB Foster.
Diversification Opportunities for Lincoln Educational and LB Foster
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lincoln and FSTR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Lincoln Educational Services and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Lincoln Educational 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 Lincoln Educational Services 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 Lincoln Educational i.e., Lincoln Educational and LB Foster go up and down completely randomly.
Pair Corralation between Lincoln Educational and LB Foster
Given the investment horizon of 90 days Lincoln Educational is expected to generate 2.11 times less return on investment than LB Foster. But when comparing it to its historical volatility, Lincoln Educational Services is 1.22 times less risky than LB Foster. It trades about 0.29 of its potential returns per unit of risk. LB Foster is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest 1,904 in LB Foster on September 2, 2024 and sell it today you would earn a total of 969.00 from holding LB Foster or generate 50.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lincoln Educational Services vs. LB Foster
Performance |
| Timeline |
| Lincoln Educational |
| LB Foster |
Lincoln Educational and LB Foster Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lincoln Educational and LB Foster
The main advantage of trading using opposite Lincoln Educational and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lincoln Educational 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.| Lincoln Educational vs. American Public Education | Lincoln Educational vs. ATA Creativity Global | Lincoln Educational vs. Cogna Educacao SA | Lincoln Educational vs. Adtalem Global Education |
| 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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