Correlation Between FAST RETAIL and ITALIAN WINE
Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and ITALIAN WINE 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 ITALIAN WINE 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 ITALIAN WINE BRANDS, you can compare the effects of market volatilities on FAST RETAIL and ITALIAN WINE 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 ITALIAN WINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and ITALIAN WINE.
Diversification Opportunities for FAST RETAIL and ITALIAN WINE
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FAST and ITALIAN is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS 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 ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and ITALIAN WINE go up and down completely randomly.
Pair Corralation between FAST RETAIL and ITALIAN WINE
Assuming the 90 days trading horizon FAST RETAIL ADR is expected to generate 1.05 times more return on investment than ITALIAN WINE. However, FAST RETAIL is 1.05 times more volatile than ITALIAN WINE BRANDS. It trades about 0.08 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about 0.04 per unit of risk. If you would invest 2,427 in FAST RETAIL ADR on August 25, 2024 and sell it today you would earn a total of 493.00 from holding FAST RETAIL ADR or generate 20.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAST RETAIL ADR vs. ITALIAN WINE BRANDS
Performance |
| Timeline |
| FAST RETAIL ADR |
| ITALIAN WINE BRANDS |
FAST RETAIL and ITALIAN WINE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAST RETAIL and ITALIAN WINE
The main advantage of trading using opposite FAST RETAIL and ITALIAN WINE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL position performs unexpectedly, ITALIAN WINE 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 ITALIAN WINE will offset losses from the drop in ITALIAN WINE's long position.| FAST RETAIL vs. AOYAMA TRADING | FAST RETAIL vs. J JILL INC | FAST RETAIL vs. Superior Plus Corp | FAST RETAIL vs. NMI Holdings |
| ITALIAN WINE vs. Diageo plc | ITALIAN WINE vs. Superior Plus Corp | ITALIAN WINE vs. NMI Holdings | ITALIAN WINE vs. Origin Agritech |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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