Correlation Between Fast Retailing and Genuine Parts
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Genuine Parts 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 Genuine Parts 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 Genuine Parts Co, you can compare the effects of market volatilities on Fast Retailing and Genuine Parts 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 Genuine Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Genuine Parts.
Diversification Opportunities for Fast Retailing and Genuine Parts
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fast and Genuine is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Fast Retailing i.e., Fast Retailing and Genuine Parts go up and down completely randomly.
Pair Corralation between Fast Retailing and Genuine Parts
Assuming the 90 days horizon Fast Retailing Co is expected to under-perform the Genuine Parts. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 1.45 times less risky than Genuine Parts. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Genuine Parts Co is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 11,728 in Genuine Parts Co on August 30, 2024 and sell it today you would earn a total of 1,062 from holding Genuine Parts Co or generate 9.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Fast Retailing Co vs. Genuine Parts Co
Performance |
| Timeline |
| Fast Retailing |
| Genuine Parts |
Fast Retailing and Genuine Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Genuine Parts
The main advantage of trading using opposite Fast Retailing and Genuine Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Genuine Parts 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 Genuine Parts will offset losses from the drop in Genuine Parts' long position.| Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco | Fast Retailing vs. Ross Stores | Fast Retailing vs. Burlington Stores |
| Genuine Parts vs. Dover | Genuine Parts vs. Cincinnati Financial | Genuine Parts vs. Leggett Platt Incorporated | Genuine Parts vs. WW Grainger |
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 CEOs Directory module to screen CEOs from public companies around the world.
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