Correlation Between LB Foster and AKITA Drilling

Can any of the company-specific risk be diversified away by investing in both LB Foster and AKITA Drilling 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 AKITA Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LB Foster and AKITA Drilling, you can compare the effects of market volatilities on LB Foster and AKITA Drilling 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 AKITA Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of LB Foster and AKITA Drilling.

Diversification Opportunities for LB Foster and AKITA Drilling

0.29

Correlation Coefficient

LB Foster  AKITA Drilling

Modest diversification

The 3 months correlation between FSTR and AKITA is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and AKITA Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKITA Drilling 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 AKITA Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKITA Drilling has no effect on the direction of LB Foster i.e., LB Foster and AKITA Drilling go up and down completely randomly.

Pair Corralation between LB Foster and AKITA Drilling

Given the investment horizon of 90 days LB Foster is expected to generate 1.22 times more return on investment than AKITA Drilling. However, LB Foster is 1.22 times more volatile than AKITA Drilling. It trades about 0.22 of its potential returns per unit of risk. AKITA Drilling is currently generating about 0.14 per unit of risk. If you would invest  1,957  in LB Foster on September 12, 2024 and sell it today you would earn a total of  905.00  from holding LB Foster or generate 46.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

LB Foster  vs.  AKITA Drilling

LB Foster

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, LB Foster reported solid returns over the last few months and may actually be approaching a breakup point.

AKITA Drilling

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AKITA Drilling are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, AKITA Drilling reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LB Foster and AKITA Drilling

The main advantage of trading using opposite LB Foster and AKITA Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LB Foster position performs unexpectedly, AKITA Drilling 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 AKITA Drilling will offset losses from the drop in AKITA Drilling's long position.

The idea behind LB Foster and AKITA Drilling pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.