Correlation Between Fast Retailing and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Fast Retailing and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Dow Jones.
Diversification Opportunities for Fast Retailing and Dow Jones
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Fast and Dow is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Fast Retailing i.e., Fast Retailing and Dow Jones go up and down completely randomly.
Pair Corralation between Fast Retailing and Dow Jones
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 2.49 times more return on investment than Dow Jones. However, Fast Retailing is 2.49 times more volatile than Dow Jones Industrial. It trades about 0.06 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of risk. If you would invest 24,600 in Fast Retailing Co on November 5, 2024 and sell it today you would earn a total of 5,920 from holding Fast Retailing Co or generate 24.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Fast Retailing Co vs. Dow Jones Industrial
Performance |
| Timeline |
Fast Retailing and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Fast Retailing Co
Pair trading matchups for Fast Retailing
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Fast Retailing and Dow Jones
The main advantage of trading using opposite Fast Retailing and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Fast Retailing vs. MTY Food Group | Fast Retailing vs. Performance Food Group | Fast Retailing vs. United Natural Foods | Fast Retailing vs. CarsalesCom |
| Dow Jones vs. Fernhill Beverage | Dow Jones vs. Fomento Economico Mexicano | Dow Jones vs. Loud Beverage Group | Dow Jones vs. Diageo PLC ADR |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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