Correlation Between CARRIER and LB Foster

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

By analyzing existing cross correlation between CARRIER GLOBAL P and LB Foster, you can compare the effects of market volatilities on CARRIER 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 CARRIER with a short position of LB Foster. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARRIER and LB Foster.

Diversification Opportunities for CARRIER and LB Foster

-0.42

Correlation Coefficient

CARRIER  LB Foster

Very good diversification

The 3 months correlation between CARRIER and FSTR is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding CARRIER GLOBAL P and LB Foster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LB Foster and CARRIER 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 CARRIER GLOBAL P 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 CARRIER i.e., CARRIER and LB Foster go up and down completely randomly.

Pair Corralation between CARRIER and LB Foster

Assuming the 90 days trading horizon CARRIER GLOBAL P is expected to under-perform the LB Foster. But the bond apears to be less risky and, when comparing its historical volatility, CARRIER GLOBAL P is 5.98 times less risky than LB Foster. The bond trades about -0.22 of its potential returns per unit of risk. The LB Foster is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,944  in LB Foster on September 25, 2024 and sell it today you would earn a total of  680.00  from holding LB Foster or generate 34.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

CARRIER GLOBAL P  vs.  LB Foster

CARRIER GLOBAL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARRIER GLOBAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CARRIER GLOBAL P investors.

LB Foster

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LB Foster are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, LB Foster reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CARRIER and LB Foster

The main advantage of trading using opposite CARRIER and LB Foster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARRIER 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.

The idea behind CARRIER GLOBAL P and LB Foster 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.