Correlation Between FAST RETAIL and Penta Ocean
Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and Penta Ocean 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 Penta Ocean 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 Penta Ocean Construction Co, you can compare the effects of market volatilities on FAST RETAIL and Penta Ocean 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 Penta Ocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and Penta Ocean.
Diversification Opportunities for FAST RETAIL and Penta Ocean
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FAST and Penta is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and Penta Ocean go up and down completely randomly.
Pair Corralation between FAST RETAIL and Penta Ocean
Assuming the 90 days trading horizon FAST RETAIL ADR is expected to generate 1.25 times more return on investment than Penta Ocean. However, FAST RETAIL is 1.25 times more volatile than Penta Ocean Construction Co. It trades about 0.15 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about 0.02 per unit of risk. If you would invest 2,980 in FAST RETAIL ADR on September 1, 2024 and sell it today you would earn a total of 180.00 from holding FAST RETAIL ADR or generate 6.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAST RETAIL ADR vs. Penta Ocean Construction Co
Performance |
| Timeline |
| FAST RETAIL ADR |
| Penta Ocean Construc |
FAST RETAIL and Penta Ocean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAST RETAIL and Penta Ocean
The main advantage of trading using opposite FAST RETAIL and Penta Ocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL position performs unexpectedly, Penta Ocean 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 Penta Ocean will offset losses from the drop in Penta Ocean's long position.| FAST RETAIL vs. AOYAMA TRADING | FAST RETAIL vs. Global Fashion Group | FAST RETAIL vs. Superior Plus Corp | FAST RETAIL vs. NMI Holdings |
| Penta Ocean vs. Transurban Group | Penta Ocean vs. Jiangsu Expressway | Penta Ocean vs. Zhejiang Expressway Co | Penta Ocean vs. Arcosa Inc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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