Correlation Between FAST RETAIL and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and Sterling Construction 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 Sterling Construction 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 Sterling Construction, you can compare the effects of market volatilities on FAST RETAIL and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and Sterling Construction.
Diversification Opportunities for FAST RETAIL and Sterling Construction
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FAST and Sterling is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and Sterling Construction go up and down completely randomly.
Pair Corralation between FAST RETAIL and Sterling Construction
Assuming the 90 days trading horizon FAST RETAIL is expected to generate 4.53 times less return on investment than Sterling Construction. But when comparing it to its historical volatility, FAST RETAIL ADR is 2.5 times less risky than Sterling Construction. It trades about 0.15 of its potential returns per unit of risk. Sterling Construction is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 14,125 in Sterling Construction on September 1, 2024 and sell it today you would earn a total of 4,185 from holding Sterling Construction or generate 29.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FAST RETAIL ADR vs. Sterling Construction
Performance |
| Timeline |
| FAST RETAIL ADR |
| Sterling Construction |
FAST RETAIL and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FAST RETAIL and Sterling Construction
The main advantage of trading using opposite FAST RETAIL and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction'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 |
| Sterling Construction vs. Larsen Toubro Limited | Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. NMI Holdings | Sterling Construction 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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