Correlation Between LB Foster and Chemtrade Logistics

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

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

Diversification Opportunities for LB Foster and Chemtrade Logistics

0.41

Correlation Coefficient

LB Foster  Chemtrade Logistics

Very weak diversification

The 3 months correlation between FSTR and Chemtrade is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding LB Foster and Chemtrade Logistics Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemtrade Logistics 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 Chemtrade Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemtrade Logistics has no effect on the direction of LB Foster i.e., LB Foster and Chemtrade Logistics go up and down completely randomly.

Pair Corralation between LB Foster and Chemtrade Logistics

Given the investment horizon of 90 days LB Foster is expected to generate 1.93 times more return on investment than Chemtrade Logistics. However, LB Foster is 1.93 times more volatile than Chemtrade Logistics Income. It trades about 0.21 of its potential returns per unit of risk. Chemtrade Logistics Income is currently generating about 0.0 per unit of risk. If you would invest  1,999  in LB Foster on September 20, 2024 and sell it today you would earn a total of  856.00  from holding LB Foster or generate 42.82% return on investment over 90 days.

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

LB Foster  vs.  Chemtrade Logistics Income

LB Foster

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 16 (%) 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.

Chemtrade Logistics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chemtrade Logistics Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Chemtrade Logistics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with LB Foster and Chemtrade Logistics

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

The idea behind LB Foster and Chemtrade Logistics Income 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.