Correlation Between Fast Retailing and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Auto Trader 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 Auto Trader 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 Auto Trader Group, you can compare the effects of market volatilities on Fast Retailing and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Auto Trader.
Diversification Opportunities for Fast Retailing and Auto Trader
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fast and Auto is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Fast Retailing i.e., Fast Retailing and Auto Trader go up and down completely randomly.
Pair Corralation between Fast Retailing and Auto Trader
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.29 times more return on investment than Auto Trader. However, Fast Retailing is 1.29 times more volatile than Auto Trader Group. It trades about 0.03 of its potential returns per unit of risk. Auto Trader Group is currently generating about -0.12 per unit of risk. If you would invest 29,560 in Fast Retailing Co on August 25, 2024 and sell it today you would earn a total of 420.00 from holding Fast Retailing Co or generate 1.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Auto Trader Group
Performance |
| Timeline |
| Fast Retailing |
| Auto Trader Group |
Fast Retailing and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Auto Trader
The main advantage of trading using opposite Fast Retailing and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Fast Retailing vs. Autohome ADR | Fast Retailing vs. KB HOME | Fast Retailing vs. Sqs Software Quality | Fast Retailing vs. Alfa Financial Software |
| Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader vs. Apple Inc | Auto Trader 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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