Correlation Between Fast Retailing and Retail Estates
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Retail Estates 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 Retail Estates 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 Retail Estates NV, you can compare the effects of market volatilities on Fast Retailing and Retail Estates 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 Retail Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Retail Estates.
Diversification Opportunities for Fast Retailing and Retail Estates
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fast and Retail is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV 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 Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of Fast Retailing i.e., Fast Retailing and Retail Estates go up and down completely randomly.
Pair Corralation between Fast Retailing and Retail Estates
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.82 times more return on investment than Retail Estates. However, Fast Retailing is 1.82 times more volatile than Retail Estates NV. It trades about 0.2 of its potential returns per unit of risk. Retail Estates NV is currently generating about -0.22 per unit of risk. If you would invest 29,410 in Fast Retailing Co on September 1, 2024 and sell it today you would earn a total of 2,420 from holding Fast Retailing Co or generate 8.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Retail Estates NV
Performance |
| Timeline |
| Fast Retailing |
| Retail Estates NV |
Fast Retailing and Retail Estates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Retail Estates
The main advantage of trading using opposite Fast Retailing and Retail Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Retail Estates 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 Retail Estates will offset losses from the drop in Retail Estates' long position.| Fast Retailing vs. SIVERS SEMICONDUCTORS AB | Fast Retailing vs. Darden Restaurants | Fast Retailing vs. Reliance Steel Aluminum | Fast Retailing vs. Q2M Managementberatung AG |
| Retail Estates vs. Superior Plus Corp | Retail Estates vs. NMI Holdings | Retail Estates vs. Origin Agritech | Retail Estates vs. SIVERS SEMICONDUCTORS AB |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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