Correlation Between Fast Retailing and Fomento Economico
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Fomento Economico 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 Fomento Economico 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 Fomento Economico Mexicano, you can compare the effects of market volatilities on Fast Retailing and Fomento Economico 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 Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Fomento Economico.
Diversification Opportunities for Fast Retailing and Fomento Economico
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fast and Fomento is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico 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 Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of Fast Retailing i.e., Fast Retailing and Fomento Economico go up and down completely randomly.
Pair Corralation between Fast Retailing and Fomento Economico
Assuming the 90 days horizon Fast Retailing Co is expected to generate 10.12 times more return on investment than Fomento Economico. However, Fast Retailing is 10.12 times more volatile than Fomento Economico Mexicano. It trades about 0.04 of its potential returns per unit of risk. Fomento Economico Mexicano is currently generating about 0.03 per unit of risk. If you would invest 61,000 in Fast Retailing Co on September 3, 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 Against |
| Strength | Insignificant |
| Accuracy | 75.96% |
| Values | Daily Returns |
Fast Retailing Co vs. Fomento Economico Mexicano
Performance |
| Timeline |
| Fast Retailing |
| Fomento Economico |
Fast Retailing and Fomento Economico Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Fomento Economico
The main advantage of trading using opposite Fast Retailing and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Fomento Economico 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 Fomento Economico will offset losses from the drop in Fomento Economico's long position.| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
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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 Stocks Directory module to find actively traded stocks across global markets.
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