Correlation Between Fast Retailing and Compania Cervecerias
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Compania Cervecerias 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 Retailing and Compania Cervecerias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and Compania Cervecerias Unidas, you can compare the effects of market volatilities on Fast Retailing and Compania Cervecerias 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 Retailing with a short position of Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Compania Cervecerias.
Diversification Opportunities for Fast Retailing and Compania Cervecerias
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fast and Compania is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Fast Retailing 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 Retailing Co are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Fast Retailing i.e., Fast Retailing and Compania Cervecerias go up and down completely randomly.
Pair Corralation between Fast Retailing and Compania Cervecerias
Assuming the 90 days horizon Fast Retailing Co is expected to generate 1.71 times more return on investment than Compania Cervecerias. However, Fast Retailing is 1.71 times more volatile than Compania Cervecerias Unidas. It trades about 0.03 of its potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.01 per unit of risk. If you would invest 31,326 in Fast Retailing Co on August 29, 2024 and sell it today you would earn a total of 739.00 from holding Fast Retailing Co or generate 2.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. Compania Cervecerias Unidas
Performance |
| Timeline |
| Fast Retailing |
| Compania Cervecerias |
Fast Retailing and Compania Cervecerias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Compania Cervecerias
The main advantage of trading using opposite Fast Retailing and Compania Cervecerias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Compania Cervecerias 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 Compania Cervecerias will offset losses from the drop in Compania Cervecerias' long position.| Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco | Fast Retailing vs. Ross Stores | Fast Retailing vs. Burlington Stores |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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