Correlation Between Howden Joinery and Fast Retailing

Can any of the company-specific risk be diversified away by investing in both Howden Joinery 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 Howden Joinery and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Howden Joinery Group and Fast Retailing Co, you can compare the effects of market volatilities on Howden Joinery 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 Howden Joinery with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Howden Joinery and Fast Retailing.

Diversification Opportunities for Howden Joinery and Fast Retailing

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Correlation Coefficient

Howden Joinery  Fast Retailing

Pay attention - limited upside

The 3 months correlation between Howden and Fast is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Howden Joinery Group and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Howden Joinery 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 Howden Joinery Group 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 Howden Joinery i.e., Howden Joinery and Fast Retailing go up and down completely randomly.

Pair Corralation between Howden Joinery and Fast Retailing

Assuming the 90 days horizon Howden Joinery Group is expected to under-perform the Fast Retailing. But the stock apears to be less risky and, when comparing its historical volatility, Howden Joinery Group is 1.41 times less risky than Fast Retailing. The stock trades about -0.16 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  33,250  in Fast Retailing Co on October 14, 2024 and sell it today you would lose (3,540) from holding Fast Retailing Co or give up 10.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Howden Joinery Group  vs.  Fast Retailing Co

Howden Joinery Group

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Howden Joinery Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Fast Retailing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Howden Joinery and Fast Retailing

The main advantage of trading using opposite Howden Joinery and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Howden Joinery 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 Howden Joinery Group 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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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.