Correlation Between FAST RETAIL and FIREWEED METALS
Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and FIREWEED METALS 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 FIREWEED METALS 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 FIREWEED METALS P, you can compare the effects of market volatilities on FAST RETAIL and FIREWEED METALS 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 FIREWEED METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and FIREWEED METALS.
Diversification Opportunities for FAST RETAIL and FIREWEED METALS
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between FAST and FIREWEED is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and FIREWEED METALS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIREWEED METALS P 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 FIREWEED METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIREWEED METALS P has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and FIREWEED METALS go up and down completely randomly.
Pair Corralation between FAST RETAIL and FIREWEED METALS
Assuming the 90 days trading horizon FAST RETAIL is expected to generate 1.51 times less return on investment than FIREWEED METALS. But when comparing it to its historical volatility, FAST RETAIL ADR is 1.87 times less risky than FIREWEED METALS. It trades about 0.06 of its potential returns per unit of risk. FIREWEED METALS P is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 59.00 in FIREWEED METALS P on November 3, 2024 and sell it today you would earn a total of 39.00 from holding FIREWEED METALS P or generate 66.1% 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. FIREWEED METALS P
Performance |
| Timeline |
| FAST RETAIL ADR |
| FIREWEED METALS P |
FAST RETAIL and FIREWEED METALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAST RETAIL and FIREWEED METALS
The main advantage of trading using opposite FAST RETAIL and FIREWEED METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL position performs unexpectedly, FIREWEED METALS 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 FIREWEED METALS will offset losses from the drop in FIREWEED METALS's long position.The idea behind FAST RETAIL ADR and FIREWEED METALS P 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.| FIREWEED METALS vs. Rio Tinto Group | FIREWEED METALS vs. Anglo American plc | FIREWEED METALS vs. Mineral Resources Limited | FIREWEED METALS vs. Liontown 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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