Correlation Between Fast Retailing and BBB Foods
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and BBB Foods 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 BBB Foods 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 BBB Foods, you can compare the effects of market volatilities on Fast Retailing and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and BBB Foods.
Diversification Opportunities for Fast Retailing and BBB Foods
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fast and BBB is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of Fast Retailing i.e., Fast Retailing and BBB Foods go up and down completely randomly.
Pair Corralation between Fast Retailing and BBB Foods
Assuming the 90 days horizon Fast Retailing Co is expected to under-perform the BBB Foods. 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 BBB Foods. The pink sheet trades about -0.19 of its potential returns per unit of risk. The BBB Foods is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 3,422 in BBB Foods on August 28, 2024 and sell it today you would lose (6.00) from holding BBB Foods or give up 0.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. BBB Foods
Performance |
| Timeline |
| Fast Retailing |
| BBB Foods |
Fast Retailing and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and BBB Foods
The main advantage of trading using opposite Fast Retailing and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.| Fast Retailing vs. Reitmans Limited | Fast Retailing vs. Reitmans Limited | Fast Retailing vs. Lulus Fashion Lounge | Fast Retailing vs. Duluth Holdings |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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