Correlation Between Fast Retailing and Microsoft
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on Fast Retailing and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Microsoft.
Diversification Opportunities for Fast Retailing and Microsoft
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fast and Microsoft is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Fast Retailing i.e., Fast Retailing and Microsoft go up and down completely randomly.
Pair Corralation between Fast Retailing and Microsoft
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.18 times more return on investment than Microsoft. However, Fast Retailing is 1.18 times more volatile than Microsoft. It trades about 0.03 of its potential returns per unit of risk. Microsoft is currently generating about 0.02 per unit of risk. If you would invest 30,890 in Fast Retailing Co on August 28, 2024 and sell it today you would earn a total of 310.00 from holding Fast Retailing Co or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Microsoft
Performance |
| Timeline |
| Fast Retailing |
| Microsoft |
Fast Retailing and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Microsoft
The main advantage of trading using opposite Fast Retailing and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Microsoft | Fast Retailing vs. Microsoft |
| Microsoft vs. VIRGIN WINES UK | Microsoft vs. Fast Retailing Co | Microsoft vs. Salesforce | Microsoft vs. Infrastrutture Wireless Italiane |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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