Correlation Between CVB Financial and FAST RETAIL

Can any of the company-specific risk be diversified away by investing in both CVB Financial and FAST RETAIL 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 CVB Financial and FAST RETAIL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVB Financial Corp and FAST RETAIL ADR, you can compare the effects of market volatilities on CVB Financial and FAST RETAIL 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 CVB Financial with a short position of FAST RETAIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVB Financial and FAST RETAIL.

Diversification Opportunities for CVB Financial and FAST RETAIL

0.33

Correlation Coefficient

CVB Financial  FAST RETAIL

Weak diversification

The 3 months correlation between CVB and FAST is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial Corp and FAST RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR and CVB Financial 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 CVB Financial Corp are associated (or correlated) with FAST RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of CVB Financial i.e., CVB Financial and FAST RETAIL go up and down completely randomly.

Pair Corralation between CVB Financial and FAST RETAIL

Assuming the 90 days horizon CVB Financial is expected to generate 4.29 times less return on investment than FAST RETAIL. In addition to that, CVB Financial is 1.32 times more volatile than FAST RETAIL ADR. It trades about 0.01 of its total potential returns per unit of risk. FAST RETAIL ADR is currently generating about 0.07 per unit of volatility. If you would invest  1,732  in FAST RETAIL ADR on October 10, 2024 and sell it today you would earn a total of  1,388  from holding FAST RETAIL ADR or generate 80.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

CVB Financial Corp  vs.  FAST RETAIL ADR

CVB Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

FAST RETAIL ADR

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FAST RETAIL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CVB Financial and FAST RETAIL

The main advantage of trading using opposite CVB Financial and FAST RETAIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVB Financial position performs unexpectedly, FAST RETAIL 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 RETAIL will offset losses from the drop in FAST RETAIL's long position.

The idea behind CVB Financial Corp and FAST RETAIL ADR 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.