Correlation Between BCB Bancorp and Fast Retailing

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

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

Diversification Opportunities for BCB Bancorp and Fast Retailing

0.04

Correlation Coefficient

BCB Bancorp  Fast Retailing

Significant diversification

The 3 months correlation between BCB and Fast is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding BCB Bancorp and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and BCB Bancorp 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 BCB Bancorp 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 BCB Bancorp i.e., BCB Bancorp and Fast Retailing go up and down completely randomly.

Pair Corralation between BCB Bancorp and Fast Retailing

Given the investment horizon of 90 days BCB Bancorp is expected to generate 1.61 times less return on investment than Fast Retailing. But when comparing it to its historical volatility, BCB Bancorp is 1.38 times less risky than Fast Retailing. It trades about 0.06 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  30,332  in Fast Retailing Co on September 12, 2024 and sell it today you would earn a total of  3,258  from holding Fast Retailing Co or generate 10.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

BCB Bancorp  vs.  Fast Retailing Co

BCB Bancorp

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BCB Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, BCB Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fast Retailing

Risk-Adjusted Performance

5 of 100

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 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BCB Bancorp and Fast Retailing

The main advantage of trading using opposite BCB Bancorp and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCB Bancorp 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 BCB Bancorp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.