Correlation Between Fast Retailing and National Beverage
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and National Beverage 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 National Beverage 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 National Beverage Corp, you can compare the effects of market volatilities on Fast Retailing and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and National Beverage.
Diversification Opportunities for Fast Retailing and National Beverage
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Fast and National is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Fast Retailing i.e., Fast Retailing and National Beverage go up and down completely randomly.
Pair Corralation between Fast Retailing and National Beverage
Assuming the 90 days horizon Fast Retailing Co is expected to generate 9.15 times more return on investment than National Beverage. However, Fast Retailing is 9.15 times more volatile than National Beverage Corp. It trades about 0.04 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.01 per unit of risk. If you would invest 61,000 in Fast Retailing Co on September 1, 2024 and sell it today you would lose (28,935) from holding Fast Retailing Co or give up 47.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 75.96% |
| Values | Daily Returns |
Fast Retailing Co vs. National Beverage Corp
Performance |
| Timeline |
| Fast Retailing |
| National Beverage Corp |
Fast Retailing and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and National Beverage
The main advantage of trading using opposite Fast Retailing and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
| National Beverage vs. Celsius Holdings | National Beverage vs. Monster Beverage Corp | National Beverage vs. Coca Cola Femsa SAB | National Beverage vs. Keurig Dr Pepper |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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