Correlation Between National Beverage and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both National Beverage 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 National Beverage and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Beverage Corp and Fast Retailing Co, you can compare the effects of market volatilities on National Beverage 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 National Beverage with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and Fast Retailing.
Diversification Opportunities for National Beverage and Fast Retailing
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between National and Fast is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and National Beverage 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 National Beverage Corp 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 National Beverage i.e., National Beverage and Fast Retailing go up and down completely randomly.
Pair Corralation between National Beverage and Fast Retailing
Given the investment horizon of 90 days National Beverage is expected to generate 30.7 times less return on investment than Fast Retailing. But when comparing it to its historical volatility, National Beverage Corp is 9.16 times less risky than Fast Retailing. It trades about 0.01 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 61,000 in Fast Retailing Co on September 3, 2024 and sell it today you would lose (28,935) from holding Fast Retailing Co or give up 47.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 75.96% |
| Values | Daily Returns |
National Beverage Corp vs. Fast Retailing Co
Performance |
| Timeline |
| National Beverage Corp |
| Fast Retailing |
National Beverage and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Beverage and Fast Retailing
The main advantage of trading using opposite National Beverage and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Beverage 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.| National Beverage vs. Celsius Holdings | National Beverage vs. Monster Beverage Corp | National Beverage vs. Coca Cola Femsa SAB | National Beverage vs. Keurig Dr Pepper |
| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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