Correlation Between Fast Retailing and MGIC INVESTMENT
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and MGIC INVESTMENT 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 MGIC INVESTMENT 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 MGIC INVESTMENT, you can compare the effects of market volatilities on Fast Retailing and MGIC INVESTMENT 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 MGIC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and MGIC INVESTMENT.
Diversification Opportunities for Fast Retailing and MGIC INVESTMENT
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fast and MGIC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT 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 MGIC INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC INVESTMENT has no effect on the direction of Fast Retailing i.e., Fast Retailing and MGIC INVESTMENT go up and down completely randomly.
Pair Corralation between Fast Retailing and MGIC INVESTMENT
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.57 times more return on investment than MGIC INVESTMENT. However, Fast Retailing is 1.57 times more volatile than MGIC INVESTMENT. It trades about 0.13 of its potential returns per unit of risk. MGIC INVESTMENT is currently generating about 0.16 per unit of risk. If you would invest 23,710 in Fast Retailing Co on August 30, 2024 and sell it today you would earn a total of 8,080 from holding Fast Retailing Co or generate 34.08% 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. MGIC INVESTMENT
Performance |
| Timeline |
| Fast Retailing |
| MGIC INVESTMENT |
Fast Retailing and MGIC INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and MGIC INVESTMENT
The main advantage of trading using opposite Fast Retailing and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, MGIC INVESTMENT 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 MGIC INVESTMENT will offset losses from the drop in MGIC INVESTMENT's long position.| Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Superior Plus Corp | Fast Retailing vs. SIVERS SEMICONDUCTORS AB |
| MGIC INVESTMENT vs. Lion One Metals | MGIC INVESTMENT vs. Harmony Gold Mining | MGIC INVESTMENT vs. GALENA MINING LTD | MGIC INVESTMENT vs. Perseus Mining 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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