Correlation Between Fast Retailing and LION ONE
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and LION ONE 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 LION ONE 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 LION ONE METALS, you can compare the effects of market volatilities on Fast Retailing and LION ONE 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 LION ONE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and LION ONE.
Diversification Opportunities for Fast Retailing and LION ONE
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fast and LION is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and LION ONE METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LION ONE METALS 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 LION ONE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LION ONE METALS has no effect on the direction of Fast Retailing i.e., Fast Retailing and LION ONE go up and down completely randomly.
Pair Corralation between Fast Retailing and LION ONE
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.44 times more return on investment than LION ONE. However, Fast Retailing Co is 2.27 times less risky than LION ONE. It trades about 0.07 of its potential returns per unit of risk. LION ONE METALS is currently generating about -0.03 per unit of risk. If you would invest 19,500 in Fast Retailing Co on September 3, 2024 and sell it today you would earn a total of 12,330 from holding Fast Retailing Co or generate 63.23% 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. LION ONE METALS
Performance |
| Timeline |
| Fast Retailing |
| LION ONE METALS |
Fast Retailing and LION ONE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and LION ONE
The main advantage of trading using opposite Fast Retailing and LION ONE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, LION ONE 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 LION ONE will offset losses from the drop in LION ONE's long position.| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
| LION ONE vs. HomeToGo SE | LION ONE vs. NORTHEAST UTILITIES | LION ONE vs. SBM OFFSHORE | LION ONE vs. Zijin Mining Group |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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