Correlation Between Fast Retailing and INVITATION HOMES
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and INVITATION HOMES 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 INVITATION HOMES 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 INVITATION HOMES DL, you can compare the effects of market volatilities on Fast Retailing and INVITATION HOMES 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 INVITATION HOMES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and INVITATION HOMES.
Diversification Opportunities for Fast Retailing and INVITATION HOMES
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fast and INVITATION is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and INVITATION HOMES DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INVITATION HOMES 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 INVITATION HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INVITATION HOMES has no effect on the direction of Fast Retailing i.e., Fast Retailing and INVITATION HOMES go up and down completely randomly.
Pair Corralation between Fast Retailing and INVITATION HOMES
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.18 times more return on investment than INVITATION HOMES. However, Fast Retailing is 1.18 times more volatile than INVITATION HOMES DL. It trades about 0.05 of its potential returns per unit of risk. INVITATION HOMES DL is currently generating about 0.02 per unit of risk. If you would invest 28,410 in Fast Retailing Co on August 25, 2024 and sell it today you would earn a total of 1,570 from holding Fast Retailing Co or generate 5.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. INVITATION HOMES DL
Performance |
| Timeline |
| Fast Retailing |
| INVITATION HOMES |
Fast Retailing and INVITATION HOMES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and INVITATION HOMES
The main advantage of trading using opposite Fast Retailing and INVITATION HOMES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, INVITATION HOMES 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 INVITATION HOMES will offset losses from the drop in INVITATION HOMES'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 |
| INVITATION HOMES vs. Fast Retailing Co | INVITATION HOMES vs. Verizon Communications | INVITATION HOMES vs. Iridium Communications | INVITATION HOMES vs. China Communications Services |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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