Correlation Between Gap and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Gap and Fast Retailing 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 Gap and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gap Inc and Fast Retailing Co, you can compare the effects of market volatilities on Gap and Fast Retailing 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 Gap with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap and Fast Retailing.
Diversification Opportunities for Gap and Fast Retailing
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gap and Fast is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Gap Inc and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Gap 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 Gap Inc are associated (or correlated) with Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Gap i.e., Gap and Fast Retailing go up and down completely randomly.
Pair Corralation between Gap and Fast Retailing
Considering the 90-day investment horizon Gap Inc is expected to generate 1.99 times more return on investment than Fast Retailing. However, Gap is 1.99 times more volatile than Fast Retailing Co. It trades about 0.05 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.06 per unit of risk. If you would invest 1,372 in Gap Inc on August 23, 2024 and sell it today you would earn a total of 956.00 from holding Gap Inc or generate 69.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 87.9% |
| Values | Daily Returns |
Gap Inc vs. Fast Retailing Co
Performance |
| Timeline |
| Gap Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Fast Retailing |
Gap and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gap and Fast Retailing
The main advantage of trading using opposite Gap and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing's long position.The idea behind Gap Inc and Fast Retailing Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Fast Retailing vs. The TJX Companies | Fast Retailing vs. Lululemon Athletica | Fast Retailing vs. Industria de Diseo | Fast Retailing vs. Ross Stores |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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