Correlation Between Austral Gold and Fast Retailing

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Can any of the company-specific risk be diversified away by investing in both Austral Gold 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 Austral Gold and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Austral Gold Limited and Fast Retailing Co, you can compare the effects of market volatilities on Austral Gold 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 Austral Gold with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austral Gold and Fast Retailing.

Diversification Opportunities for Austral Gold and Fast Retailing

-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Austral and Fast is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Austral Gold Limited and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Austral Gold 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 Austral Gold Limited 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 Austral Gold i.e., Austral Gold and Fast Retailing go up and down completely randomly.

Pair Corralation between Austral Gold and Fast Retailing

Assuming the 90 days horizon Austral Gold Limited is expected to generate 13.16 times more return on investment than Fast Retailing. However, Austral Gold is 13.16 times more volatile than Fast Retailing Co. It trades about 0.16 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.07 per unit of risk. If you would invest  1.50  in Austral Gold Limited on September 22, 2024 and sell it today you would earn a total of  0.82  from holding Austral Gold Limited or generate 54.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.46%
ValuesDaily Returns

Austral Gold Limited  vs.  Fast Retailing Co

 Performance 
       Timeline  
Austral Gold Limited 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Austral Gold Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Austral Gold reported solid returns over the last few months and may actually be approaching a breakup point.
Fast Retailing 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Austral Gold and Fast Retailing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Austral Gold and Fast Retailing

The main advantage of trading using opposite Austral Gold and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austral Gold 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 Austral Gold Limited 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.
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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