Correlation Between BP PLC and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both BP PLC and Fast Retailing 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 BP PLC and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP PLC DZ1 and Fast Retailing Co, you can compare the effects of market volatilities on BP PLC and Fast Retailing 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 BP PLC with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and Fast Retailing.
Diversification Opportunities for BP PLC and Fast Retailing
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between BPE and Fast is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC DZ1 and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and BP PLC 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 BP PLC DZ1 are associated (or correlated) with Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of BP PLC i.e., BP PLC and Fast Retailing go up and down completely randomly.
Pair Corralation between BP PLC and Fast Retailing
Assuming the 90 days horizon BP PLC DZ1 is expected to under-perform the Fast Retailing. In addition to that, BP PLC is 1.03 times more volatile than Fast Retailing Co. It trades about -0.01 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about 0.07 per unit of volatility. If you would invest 19,333 in Fast Retailing Co on September 14, 2024 and sell it today you would earn a total of 14,327 from holding Fast Retailing Co or generate 74.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BP PLC DZ1 vs. Fast Retailing Co
Performance |
| Timeline |
| BP PLC DZ1 |
| Fast Retailing |
BP PLC and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BP PLC and Fast Retailing
The main advantage of trading using opposite BP PLC and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing's long position.| BP PLC vs. Fast Retailing Co | BP PLC vs. Grupo Carso SAB | BP PLC vs. Geely Automobile Holdings | BP PLC vs. CARSALESCOM |
| Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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