Correlation Between Fast Retailing and Carsales
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Carsales 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 Carsales 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 CarsalesCom, you can compare the effects of market volatilities on Fast Retailing and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Carsales.
Diversification Opportunities for Fast Retailing and Carsales
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and Carsales is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Fast Retailing i.e., Fast Retailing and Carsales go up and down completely randomly.
Pair Corralation between Fast Retailing and Carsales
Assuming the 90 days trading horizon Fast Retailing is expected to generate 1.58 times less return on investment than Carsales. In addition to that, Fast Retailing is 1.64 times more volatile than CarsalesCom. It trades about 0.09 of its total potential returns per unit of risk. CarsalesCom is currently generating about 0.23 per unit of volatility. If you would invest 2,260 in CarsalesCom on September 5, 2024 and sell it today you would earn a total of 300.00 from holding CarsalesCom or generate 13.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. CarsalesCom
Performance |
| Timeline |
| Fast Retailing |
| CarsalesCom |
Fast Retailing and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Carsales
The main advantage of trading using opposite Fast Retailing and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
| Carsales vs. Fast Retailing Co | Carsales vs. Vastned Retail NV | Carsales vs. DiamondRock Hospitality | Carsales vs. Bumrungrad Hospital Public |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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