Correlation Between BANK CENTRAL and FAST RETAIL

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

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

Diversification Opportunities for BANK CENTRAL and FAST RETAIL

0.81

Correlation Coefficient

BANK CENTRAL  FAST RETAIL

Very poor diversification

The 3 months correlation between BANK and FAST is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BANK CENTRAL ASIA 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 BANK CENTRAL 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 BANK CENTRAL ASIA 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 BANK CENTRAL i.e., BANK CENTRAL and FAST RETAIL go up and down completely randomly.

Pair Corralation between BANK CENTRAL and FAST RETAIL

Assuming the 90 days trading horizon BANK CENTRAL ASIA is expected to under-perform the FAST RETAIL. In addition to that, BANK CENTRAL is 1.18 times more volatile than FAST RETAIL ADR. It trades about -0.16 of its total potential returns per unit of risk. FAST RETAIL ADR is currently generating about -0.12 per unit of volatility. If you would invest  3,140  in FAST RETAIL ADR on December 19, 2024 and sell it today you would lose (380.00) from holding FAST RETAIL ADR or give up 12.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

BANK CENTRAL ASIA  vs.  FAST RETAIL ADR

BANK CENTRAL ASIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK CENTRAL ASIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

FAST RETAIL ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days FAST RETAIL ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BANK CENTRAL and FAST RETAIL

The main advantage of trading using opposite BANK CENTRAL and FAST RETAIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK CENTRAL 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 BANK CENTRAL ASIA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.