Correlation Between Fast Retailing and Sekisui Chemical
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Sekisui Chemical 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 Sekisui Chemical 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 Sekisui Chemical Co, you can compare the effects of market volatilities on Fast Retailing and Sekisui Chemical 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 Sekisui Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Sekisui Chemical.
Diversification Opportunities for Fast Retailing and Sekisui Chemical
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fast and Sekisui is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical 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 Sekisui Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui Chemical has no effect on the direction of Fast Retailing i.e., Fast Retailing and Sekisui Chemical go up and down completely randomly.
Pair Corralation between Fast Retailing and Sekisui Chemical
Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.96 times more return on investment than Sekisui Chemical. However, Fast Retailing Co is 1.04 times less risky than Sekisui Chemical. It trades about 0.07 of its potential returns per unit of risk. Sekisui Chemical Co is currently generating about 0.04 per unit of risk. If you would invest 24,200 in Fast Retailing Co on November 3, 2024 and sell it today you would earn a total of 7,230 from holding Fast Retailing Co or generate 29.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Fast Retailing Co vs. Sekisui Chemical Co
Performance |
| Timeline |
| Fast Retailing |
| Sekisui Chemical |
Fast Retailing and Sekisui Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Sekisui Chemical
The main advantage of trading using opposite Fast Retailing and Sekisui Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Sekisui Chemical 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 Sekisui Chemical will offset losses from the drop in Sekisui Chemical's long position.| Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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