Correlation Between Fast Retailing and Lowes Companies
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Lowes Companies 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 Lowes Companies 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 Lowes Companies, you can compare the effects of market volatilities on Fast Retailing and Lowes Companies 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 Lowes Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Lowes Companies.
Diversification Opportunities for Fast Retailing and Lowes Companies
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fast and Lowes is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Lowes Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lowes Companies 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 Lowes Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lowes Companies has no effect on the direction of Fast Retailing i.e., Fast Retailing and Lowes Companies go up and down completely randomly.
Pair Corralation between Fast Retailing and Lowes Companies
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.09 times more return on investment than Lowes Companies. However, Fast Retailing is 1.09 times more volatile than Lowes Companies. It trades about 0.08 of its potential returns per unit of risk. Lowes Companies is currently generating about 0.05 per unit of risk. If you would invest 18,667 in Fast Retailing Co on September 13, 2024 and sell it today you would earn a total of 14,953 from holding Fast Retailing Co or generate 80.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Lowes Companies
Performance |
| Timeline |
| Fast Retailing |
| Lowes Companies |
Fast Retailing and Lowes Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Lowes Companies
The main advantage of trading using opposite Fast Retailing and Lowes Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Lowes Companies 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 Lowes Companies will offset losses from the drop in Lowes Companies' long position.| Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc |
| Lowes Companies vs. Playtech plc | Lowes Companies vs. Canon Marketing Japan | Lowes Companies vs. VIAPLAY GROUP AB | Lowes Companies 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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