Correlation Between Union Pacific and LB Foster
Can any of the company-specific risk be diversified away by investing in both Union Pacific 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 Union Pacific and LB Foster into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Pacific and LB Foster, you can compare the effects of market volatilities on Union Pacific 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 Union Pacific with a short position of LB Foster. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Pacific and LB Foster.
Diversification Opportunities for Union Pacific and LB Foster
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Union and FSTR is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Union Pacific and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and Union Pacific 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 Union Pacific 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 Union Pacific i.e., Union Pacific and LB Foster go up and down completely randomly.
Pair Corralation between Union Pacific and LB Foster
Considering the 90-day investment horizon Union Pacific is expected to under-perform the LB Foster. But the stock apears to be less risky and, when comparing its historical volatility, Union Pacific is 2.2 times less risky than LB Foster. The stock trades about -0.01 of its potential returns per unit of risk. The LB Foster is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,963 in LB Foster on August 23, 2024 and sell it today you would earn a total of 764.00 from holding LB Foster or generate 38.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Pacific vs. LB Foster
Performance |
| Timeline |
| Union Pacific |
| LB Foster |
Union Pacific and LB Foster Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Pacific and LB Foster
The main advantage of trading using opposite Union Pacific and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Pacific 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.| Union Pacific vs. Norfolk Southern | Union Pacific vs. CSX Corporation | Union Pacific vs. United Parcel Service | Union Pacific vs. Canadian National Railway |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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