Correlation Between Fast Retailing and KB HOME
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and KB HOME 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 KB HOME 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 KB HOME, you can compare the effects of market volatilities on Fast Retailing and KB HOME 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 KB HOME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and KB HOME.
Diversification Opportunities for Fast Retailing and KB HOME
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fast and KBH is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME 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 KB HOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB HOME has no effect on the direction of Fast Retailing i.e., Fast Retailing and KB HOME go up and down completely randomly.
Pair Corralation between Fast Retailing and KB HOME
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.74 times more return on investment than KB HOME. However, Fast Retailing Co is 1.35 times less risky than KB HOME. It trades about -0.07 of its potential returns per unit of risk. KB HOME is currently generating about -0.14 per unit of risk. If you would invest 30,450 in Fast Retailing Co on November 27, 2024 and sell it today you would lose (720.00) from holding Fast Retailing Co or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. KB HOME
Performance |
| Timeline |
| Fast Retailing |
| KB HOME |
Fast Retailing and KB HOME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and KB HOME
The main advantage of trading using opposite Fast Retailing and KB HOME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, KB HOME 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 KB HOME will offset losses from the drop in KB HOME's long position.| Fast Retailing vs. Playa Hotels Resorts | Fast Retailing vs. GUILD ESPORTS PLC | Fast Retailing vs. UNIVERSAL DISPLAY | Fast Retailing vs. Aristocrat Leisure Limited |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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