Correlation Between Fast Retailing and CN MODERN
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and CN MODERN 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 Fast Retailing and CN MODERN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and CN MODERN DAIRY, you can compare the effects of market volatilities on Fast Retailing and CN MODERN 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 Fast Retailing with a short position of CN MODERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and CN MODERN.
Diversification Opportunities for Fast Retailing and CN MODERN
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and 07M is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and CN MODERN DAIRY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN MODERN DAIRY and Fast Retailing 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 Fast Retailing Co are associated (or correlated) with CN MODERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN MODERN DAIRY has no effect on the direction of Fast Retailing i.e., Fast Retailing and CN MODERN go up and down completely randomly.
Pair Corralation between Fast Retailing and CN MODERN
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.08 times more return on investment than CN MODERN. However, Fast Retailing is 1.08 times more volatile than CN MODERN DAIRY. It trades about 0.18 of its potential returns per unit of risk. CN MODERN DAIRY is currently generating about -0.01 per unit of risk. If you would invest 29,770 in Fast Retailing Co on September 3, 2024 and sell it today you would earn a total of 2,060 from holding Fast Retailing Co or generate 6.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. CN MODERN DAIRY
Performance |
| Timeline |
| Fast Retailing |
| CN MODERN DAIRY |
Fast Retailing and CN MODERN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and CN MODERN
The main advantage of trading using opposite Fast Retailing and CN MODERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, CN MODERN 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 CN MODERN will offset losses from the drop in CN MODERN's long position.| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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