Correlation Between Retail Estates and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Retail Estates 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 Retail Estates and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Retail Estates NV and Fast Retailing Co, you can compare the effects of market volatilities on Retail Estates 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 Retail Estates with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Retail Estates and Fast Retailing.
Diversification Opportunities for Retail Estates and Fast Retailing
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Retail and Fast is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Retail Estates 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 Retail Estates NV 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 Retail Estates i.e., Retail Estates and Fast Retailing go up and down completely randomly.
Pair Corralation between Retail Estates and Fast Retailing
Assuming the 90 days horizon Retail Estates NV is expected to under-perform the Fast Retailing. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates NV is 1.24 times less risky than Fast Retailing. The stock trades about -0.07 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 23,700 in Fast Retailing Co on September 3, 2024 and sell it today you would earn a total of 8,100 from holding Fast Retailing Co or generate 34.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Retail Estates NV vs. Fast Retailing Co
Performance |
| Timeline |
| Retail Estates NV |
| Fast Retailing |
Retail Estates and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Retail Estates and Fast Retailing
The main advantage of trading using opposite Retail Estates and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates 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.| Retail Estates vs. Axway Software SA | Retail Estates vs. ATOSS SOFTWARE | Retail Estates vs. G8 EDUCATION | Retail Estates vs. American Public Education |
| Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc | Fast Retailing vs. Apple Inc |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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