Correlation Between Fast Retailing and InPlay Oil
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and InPlay Oil 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 InPlay Oil 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 InPlay Oil Corp, you can compare the effects of market volatilities on Fast Retailing and InPlay Oil 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 InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and InPlay Oil.
Diversification Opportunities for Fast Retailing and InPlay Oil
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fast and InPlay is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp 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 InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of Fast Retailing i.e., Fast Retailing and InPlay Oil go up and down completely randomly.
Pair Corralation between Fast Retailing and InPlay Oil
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.85 times more return on investment than InPlay Oil. However, Fast Retailing Co is 1.17 times less risky than InPlay Oil. It trades about 0.08 of its potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.03 per unit of risk. If you would invest 18,500 in Fast Retailing Co on September 19, 2024 and sell it today you would earn a total of 14,230 from holding Fast Retailing Co or generate 76.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. InPlay Oil Corp
Performance |
| Timeline |
| Fast Retailing |
| InPlay Oil Corp |
Fast Retailing and InPlay Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and InPlay Oil
The main advantage of trading using opposite Fast Retailing and InPlay Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, InPlay Oil 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 InPlay Oil will offset losses from the drop in InPlay Oil's long position.| Fast Retailing vs. EMBARK EDUCATION LTD | Fast Retailing vs. STRAYER EDUCATION | Fast Retailing vs. SEI INVESTMENTS | Fast Retailing vs. Apollo Investment Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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