Correlation Between Fast Retailing and Air China
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Air China 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 Air China 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 Air China Limited, you can compare the effects of market volatilities on Fast Retailing and Air China 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 Air China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Air China.
Diversification Opportunities for Fast Retailing and Air China
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and Air is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Air China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China Limited 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 Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China Limited has no effect on the direction of Fast Retailing i.e., Fast Retailing and Air China go up and down completely randomly.
Pair Corralation between Fast Retailing and Air China
Assuming the 90 days trading horizon Fast Retailing is expected to generate 1.57 times less return on investment than Air China. But when comparing it to its historical volatility, Fast Retailing Co is 1.76 times less risky than Air China. It trades about 0.3 of its potential returns per unit of risk. Air China Limited is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 54.00 in Air China Limited on September 12, 2024 and sell it today you would earn a total of 10.00 from holding Air China Limited or generate 18.52% 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. Air China Limited
Performance |
| Timeline |
| Fast Retailing |
| Air China Limited |
Fast Retailing and Air China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Air China
The main advantage of trading using opposite Fast Retailing and Air China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Air China 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 Air China will offset losses from the drop in Air China's long position.| Fast Retailing vs. Mitsubishi Materials | Fast Retailing vs. Martin Marietta Materials | Fast Retailing vs. Infrastrutture Wireless Italiane | Fast Retailing vs. The Yokohama Rubber |
| Air China vs. RYANAIR HLDGS ADR | Air China vs. Ryanair Holdings plc | Air China vs. Superior Plus Corp | Air China vs. SIVERS SEMICONDUCTORS AB |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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