Correlation Between Fast Retailing and Rock Tech
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Rock Tech 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 Rock Tech 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 Rock Tech Lithium, you can compare the effects of market volatilities on Fast Retailing and Rock Tech 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 Rock Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Rock Tech.
Diversification Opportunities for Fast Retailing and Rock Tech
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fast and Rock is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Rock Tech Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rock Tech Lithium 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 Rock Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rock Tech Lithium has no effect on the direction of Fast Retailing i.e., Fast Retailing and Rock Tech go up and down completely randomly.
Pair Corralation between Fast Retailing and Rock Tech
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.51 times more return on investment than Rock Tech. However, Fast Retailing Co is 1.95 times less risky than Rock Tech. It trades about 0.22 of its potential returns per unit of risk. Rock Tech Lithium is currently generating about -0.11 per unit of risk. If you would invest 29,770 in Fast Retailing Co on September 5, 2024 and sell it today you would earn a total of 2,690 from holding Fast Retailing Co or generate 9.04% 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. Rock Tech Lithium
Performance |
| Timeline |
| Fast Retailing |
| Rock Tech Lithium |
Fast Retailing and Rock Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Rock Tech
The main advantage of trading using opposite Fast Retailing and Rock Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Rock Tech 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 Rock Tech will offset losses from the drop in Rock Tech's long position.| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
| Rock Tech vs. American Eagle Outfitters | Rock Tech vs. The Trade Desk | Rock Tech vs. HomeToGo SE | Rock Tech vs. Fast Retailing Co |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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