Correlation Between Fast Retailing and Global Fashion
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Global Fashion 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 Global Fashion 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 Global Fashion Group, you can compare the effects of market volatilities on Fast Retailing and Global Fashion 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 Global Fashion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Global Fashion.
Diversification Opportunities for Fast Retailing and Global Fashion
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and Global is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Global Fashion Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fashion Group 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 Global Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fashion Group has no effect on the direction of Fast Retailing i.e., Fast Retailing and Global Fashion go up and down completely randomly.
Pair Corralation between Fast Retailing and Global Fashion
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.21 times more return on investment than Global Fashion. However, Fast Retailing Co is 4.71 times less risky than Global Fashion. It trades about 0.07 of its potential returns per unit of risk. Global Fashion Group is currently generating about -0.01 per unit of risk. If you would invest 19,333 in Fast Retailing Co on September 5, 2024 and sell it today you would earn a total of 13,127 from holding Fast Retailing Co or generate 67.9% 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. Global Fashion Group
Performance |
| Timeline |
| Fast Retailing |
| Global Fashion Group |
Fast Retailing and Global Fashion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Global Fashion
The main advantage of trading using opposite Fast Retailing and Global Fashion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Global Fashion 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 Global Fashion will offset losses from the drop in Global Fashion's long position.| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
| Global Fashion vs. BURLINGTON STORES | Global Fashion vs. FLOW TRADERS LTD | Global Fashion vs. Vastned Retail NV | Global Fashion vs. Fast Retailing Co |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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