Correlation Between Carsales and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Carsales 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 Carsales and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CarsalesCom and Fast Retailing Co, you can compare the effects of market volatilities on Carsales 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 Carsales with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carsales and Fast Retailing.
Diversification Opportunities for Carsales and Fast Retailing
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Carsales and Fast is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Carsales 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 CarsalesCom 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 Carsales i.e., Carsales and Fast Retailing go up and down completely randomly.
Pair Corralation between Carsales and Fast Retailing
Assuming the 90 days horizon CarsalesCom is expected to generate 0.6 times more return on investment than Fast Retailing. However, CarsalesCom is 1.67 times less risky than Fast Retailing. It trades about 0.5 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 2,260 in CarsalesCom on September 5, 2024 and sell it today you would earn a total of 300.00 from holding CarsalesCom or generate 13.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CarsalesCom vs. Fast Retailing Co
Performance |
| Timeline |
| CarsalesCom |
| Fast Retailing |
Carsales and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carsales and Fast Retailing
The main advantage of trading using opposite Carsales and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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.| Carsales vs. Fast Retailing Co | Carsales vs. Vastned Retail NV | Carsales vs. DiamondRock Hospitality | Carsales vs. Bumrungrad Hospital Public |
| Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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