Correlation Between Fast Retailing and Steven Madden
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Steven Madden 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 Steven Madden 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 Steven Madden, you can compare the effects of market volatilities on Fast Retailing and Steven Madden 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 Steven Madden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Steven Madden.
Diversification Opportunities for Fast Retailing and Steven Madden
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fast and Steven is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Fast Retailing i.e., Fast Retailing and Steven Madden go up and down completely randomly.
Pair Corralation between Fast Retailing and Steven Madden
Assuming the 90 days horizon Fast Retailing Co is expected to generate 1.51 times more return on investment than Steven Madden. However, Fast Retailing is 1.51 times more volatile than Steven Madden. It trades about 0.08 of its potential returns per unit of risk. Steven Madden is currently generating about 0.02 per unit of risk. If you would invest 25,970 in Fast Retailing Co on September 1, 2024 and sell it today you would earn a total of 6,095 from holding Fast Retailing Co or generate 23.47% 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. Steven Madden
Performance |
| Timeline |
| Fast Retailing |
| Steven Madden |
Fast Retailing and Steven Madden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Steven Madden
The main advantage of trading using opposite Fast Retailing and Steven Madden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Steven Madden 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 Steven Madden will offset losses from the drop in Steven Madden's long position.| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
| Steven Madden vs. Deckers Outdoor | Steven Madden vs. On Holding | Steven Madden vs. Crocs Inc | Steven Madden vs. Designer Brands |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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