Correlation Between Fast Retailing and BANDAI NAMCO
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and BANDAI NAMCO 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 BANDAI NAMCO 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 BANDAI NAMCO Holdings, you can compare the effects of market volatilities on Fast Retailing and BANDAI NAMCO 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 BANDAI NAMCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and BANDAI NAMCO.
Diversification Opportunities for Fast Retailing and BANDAI NAMCO
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fast and BANDAI is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings 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 BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of Fast Retailing i.e., Fast Retailing and BANDAI NAMCO go up and down completely randomly.
Pair Corralation between Fast Retailing and BANDAI NAMCO
Assuming the 90 days trading horizon Fast Retailing is expected to generate 4.71 times less return on investment than BANDAI NAMCO. But when comparing it to its historical volatility, Fast Retailing Co is 4.61 times less risky than BANDAI NAMCO. It trades about 0.08 of its potential returns per unit of risk. BANDAI NAMCO Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 255.00 in BANDAI NAMCO Holdings on September 12, 2024 and sell it today you would earn a total of 1,776 from holding BANDAI NAMCO Holdings or generate 696.47% 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. BANDAI NAMCO Holdings
Performance |
| Timeline |
| Fast Retailing |
| BANDAI NAMCO Holdings |
Fast Retailing and BANDAI NAMCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and BANDAI NAMCO
The main advantage of trading using opposite Fast Retailing and BANDAI NAMCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, BANDAI NAMCO 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 BANDAI NAMCO will offset losses from the drop in BANDAI NAMCO's long position.| Fast Retailing vs. Mitsubishi Materials | Fast Retailing vs. Martin Marietta Materials | Fast Retailing vs. Infrastrutture Wireless Italiane | Fast Retailing vs. The Yokohama Rubber |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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