Correlation Between Boot Barn and Fast Retailing

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

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

Diversification Opportunities for Boot Barn and Fast Retailing

0.51

Correlation Coefficient

Boot Barn  Fast Retailing

Very weak diversification

The 3 months correlation between Boot and Fast is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Boot Barn Holdings and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Boot Barn 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 Boot Barn Holdings 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 Boot Barn i.e., Boot Barn and Fast Retailing go up and down completely randomly.

Pair Corralation between Boot Barn and Fast Retailing

Given the investment horizon of 90 days Boot Barn is expected to generate 1.49 times less return on investment than Fast Retailing. In addition to that, Boot Barn is 1.65 times more volatile than Fast Retailing Co. It trades about 0.05 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about 0.12 per unit of volatility. If you would invest  2,536  in Fast Retailing Co on September 26, 2024 and sell it today you would earn a total of  834.00  from holding Fast Retailing Co or generate 32.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Boot Barn Holdings  vs.  Fast Retailing Co

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fast Retailing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Boot Barn and Fast Retailing

The main advantage of trading using opposite Boot Barn and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boot Barn 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 Boot Barn Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.