Correlation Between Fast Retailing and ScanSource
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and ScanSource 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 ScanSource 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 ScanSource, you can compare the effects of market volatilities on Fast Retailing and ScanSource 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 ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and ScanSource.
Diversification Opportunities for Fast Retailing and ScanSource
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fast and ScanSource is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Fast Retailing i.e., Fast Retailing and ScanSource go up and down completely randomly.
Pair Corralation between Fast Retailing and ScanSource
Assuming the 90 days trading horizon Fast Retailing is expected to generate 1.07 times less return on investment than ScanSource. But when comparing it to its historical volatility, Fast Retailing Co is 1.2 times less risky than ScanSource. It trades about 0.07 of its potential returns per unit of risk. ScanSource is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,860 in ScanSource on September 3, 2024 and sell it today you would earn a total of 1,860 from holding ScanSource or generate 65.03% 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. ScanSource
Performance |
| Timeline |
| Fast Retailing |
| ScanSource |
Fast Retailing and ScanSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and ScanSource
The main advantage of trading using opposite Fast Retailing and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, ScanSource 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 ScanSource will offset losses from the drop in ScanSource's long position.| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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