Correlation Between Fast Retailing and Entravision Communications
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Entravision Communications 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 Entravision Communications 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 Entravision Communications, you can compare the effects of market volatilities on Fast Retailing and Entravision Communications 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 Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Entravision Communications.
Diversification Opportunities for Fast Retailing and Entravision Communications
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fast and Entravision is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications 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 Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of Fast Retailing i.e., Fast Retailing and Entravision Communications go up and down completely randomly.
Pair Corralation between Fast Retailing and Entravision Communications
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.49 times more return on investment than Entravision Communications. However, Fast Retailing Co is 2.04 times less risky than Entravision Communications. It trades about 0.45 of its potential returns per unit of risk. Entravision Communications is currently generating about 0.03 per unit of risk. If you would invest 29,000 in Fast Retailing Co on September 13, 2024 and sell it today you would earn a total of 4,620 from holding Fast Retailing Co or generate 15.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Entravision Communications
Performance |
| Timeline |
| Fast Retailing |
| Entravision Communications |
Fast Retailing and Entravision Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Entravision Communications
The main advantage of trading using opposite Fast Retailing and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Entravision Communications 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 Entravision Communications will offset losses from the drop in Entravision Communications' long position.| Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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