Correlation Between Fast Retailing and Western Digital
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Western Digital 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 Western Digital 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 Western Digital, you can compare the effects of market volatilities on Fast Retailing and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Western Digital.
Diversification Opportunities for Fast Retailing and Western Digital
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Fast and Western is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Fast Retailing i.e., Fast Retailing and Western Digital go up and down completely randomly.
Pair Corralation between Fast Retailing and Western Digital
Assuming the 90 days horizon Fast Retailing Co is expected to generate 4.64 times more return on investment than Western Digital. However, Fast Retailing is 4.64 times more volatile than Western Digital. It trades about 0.05 of its potential returns per unit of risk. Western Digital is currently generating about 0.08 per unit of risk. If you would invest 18,825 in Fast Retailing Co on September 13, 2024 and sell it today you would earn a total of 14,765 from holding Fast Retailing Co or generate 78.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 75.91% |
| Values | Daily Returns |
Fast Retailing Co vs. Western Digital
Performance |
| Timeline |
| Fast Retailing |
| Western Digital |
Fast Retailing and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and Western Digital
The main advantage of trading using opposite Fast Retailing and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital's long position.| Fast Retailing vs. Aritzia | Fast Retailing vs. Boot Barn Holdings | Fast Retailing vs. Guess Inc | Fast Retailing vs. The TJX Companies |
| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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