Correlation Between Highlight Communications and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Highlight Communications 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 Highlight Communications and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and Fast Retailing Co, you can compare the effects of market volatilities on Highlight Communications 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 Highlight Communications with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and Fast Retailing.
Diversification Opportunities for Highlight Communications and Fast Retailing
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Highlight and Fast is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and Fast Retailing go up and down completely randomly.
Pair Corralation between Highlight Communications and Fast Retailing
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 2.94 times more return on investment than Fast Retailing. However, Highlight Communications is 2.94 times more volatile than Fast Retailing Co. It trades about 0.33 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.26 per unit of risk. If you would invest 110.00 in Highlight Communications AG on October 25, 2024 and sell it today you would earn a total of 45.00 from holding Highlight Communications AG or generate 40.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. Fast Retailing Co
Performance |
| Timeline |
| Highlight Communications |
| Fast Retailing |
Highlight Communications and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and Fast Retailing
The main advantage of trading using opposite Highlight Communications and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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 Highlight Communications AG 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.
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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 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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