Correlation Between Fast Retailing and International Business
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on Fast Retailing and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and International Business.
Diversification Opportunities for Fast Retailing and International Business
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fast and International is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Fast Retailing i.e., Fast Retailing and International Business go up and down completely randomly.
Pair Corralation between Fast Retailing and International Business
Assuming the 90 days trading horizon Fast Retailing is expected to generate 1.45 times less return on investment than International Business. In addition to that, Fast Retailing is 1.18 times more volatile than International Business Machines. It trades about 0.1 of its total potential returns per unit of risk. International Business Machines is currently generating about 0.17 per unit of volatility. If you would invest 18,190 in International Business Machines on September 4, 2024 and sell it today you would earn a total of 3,455 from holding International Business Machines or generate 18.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. International Business Machine
Performance |
| Timeline |
| Fast Retailing |
| International Business |
Fast Retailing and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and International Business
The main advantage of trading using opposite Fast Retailing and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
| International Business vs. Brockhaus Capital Management | International Business vs. Sims Metal Management | International Business vs. FEMALE HEALTH | International Business 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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