Correlation Between FAST RETAIL and CDN IMPERIAL
Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and CDN IMPERIAL 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 RETAIL and CDN IMPERIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FAST RETAIL ADR and CDN IMPERIAL BANK, you can compare the effects of market volatilities on FAST RETAIL and CDN IMPERIAL 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 RETAIL with a short position of CDN IMPERIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and CDN IMPERIAL.
Diversification Opportunities for FAST RETAIL and CDN IMPERIAL
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FAST and CDN is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and CDN IMPERIAL BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN IMPERIAL BANK and FAST RETAIL 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 RETAIL ADR are associated (or correlated) with CDN IMPERIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN IMPERIAL BANK has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and CDN IMPERIAL go up and down completely randomly.
Pair Corralation between FAST RETAIL and CDN IMPERIAL
Assuming the 90 days trading horizon FAST RETAIL ADR is expected to generate 1.62 times more return on investment than CDN IMPERIAL. However, FAST RETAIL is 1.62 times more volatile than CDN IMPERIAL BANK. It trades about 0.06 of its potential returns per unit of risk. CDN IMPERIAL BANK is currently generating about 0.09 per unit of risk. If you would invest 1,863 in FAST RETAIL ADR on October 26, 2024 and sell it today you would earn a total of 1,117 from holding FAST RETAIL ADR or generate 59.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAST RETAIL ADR vs. CDN IMPERIAL BANK
Performance |
| Timeline |
| FAST RETAIL ADR |
| CDN IMPERIAL BANK |
FAST RETAIL and CDN IMPERIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAST RETAIL and CDN IMPERIAL
The main advantage of trading using opposite FAST RETAIL and CDN IMPERIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL position performs unexpectedly, CDN IMPERIAL 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 CDN IMPERIAL will offset losses from the drop in CDN IMPERIAL's long position.The idea behind FAST RETAIL ADR and CDN IMPERIAL BANK pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| CDN IMPERIAL vs. Corporate Travel Management | CDN IMPERIAL vs. Brockhaus Capital Management | CDN IMPERIAL vs. Japan Tobacco | CDN IMPERIAL vs. Sixt Leasing SE |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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