Correlation Between Fast Retailing and BP PLC
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and BP PLC 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 BP PLC 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 BP PLC DZ1, you can compare the effects of market volatilities on Fast Retailing and BP PLC 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 BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and BP PLC.
Diversification Opportunities for Fast Retailing and BP PLC
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fast and BPE is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and BP PLC DZ1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC DZ1 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 BP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP PLC DZ1 has no effect on the direction of Fast Retailing i.e., Fast Retailing and BP PLC go up and down completely randomly.
Pair Corralation between Fast Retailing and BP PLC
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.97 times more return on investment than BP PLC. However, Fast Retailing Co is 1.03 times less risky than BP PLC. It trades about 0.07 of its potential returns per unit of risk. BP PLC DZ1 is currently generating about -0.01 per unit of risk. If you would invest 19,333 in Fast Retailing Co on September 14, 2024 and sell it today you would earn a total of 14,327 from holding Fast Retailing Co or generate 74.11% 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. BP PLC DZ1
Performance |
| Timeline |
| Fast Retailing |
| BP PLC DZ1 |
Fast Retailing and BP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and BP PLC
The main advantage of trading using opposite Fast Retailing and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, BP PLC 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 BP PLC will offset losses from the drop in BP PLC's long position.| Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc |
| BP PLC vs. Fast Retailing Co | BP PLC vs. Grupo Carso SAB | BP PLC vs. Geely Automobile Holdings | BP PLC vs. CARSALESCOM |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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