Correlation Between Auto Trader and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Fast Retailing Co, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Fast Retailing.
Diversification Opportunities for Auto Trader and Fast Retailing
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Auto and Fast is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader 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 Auto Trader 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 Auto Trader 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 Auto Trader i.e., Auto Trader and Fast Retailing go up and down completely randomly.
Pair Corralation between Auto Trader and Fast Retailing
Assuming the 90 days trading horizon Auto Trader is expected to generate 25.88 times less return on investment than Fast Retailing. But when comparing it to its historical volatility, Auto Trader Group is 1.32 times less risky than Fast Retailing. It trades about 0.01 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 27,500 in Fast Retailing Co on September 8, 2024 and sell it today you would earn a total of 5,270 from holding Fast Retailing Co or generate 19.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Auto Trader Group vs. Fast Retailing Co
Performance |
Timeline |
Auto Trader Group |
Fast Retailing |
Auto Trader and Fast Retailing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Auto Trader and Fast Retailing
The main advantage of trading using opposite Auto Trader and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.Auto Trader vs. Canadian Utilities Limited | Auto Trader vs. UMC Electronics Co | Auto Trader vs. SCANSOURCE | Auto Trader vs. Renesas Electronics |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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