Correlation Between Easy Software and Fast Retailing

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

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

Diversification Opportunities for Easy Software and Fast Retailing

0.43

Correlation Coefficient

Easy Software  Fast Retailing

Very weak diversification

The 3 months correlation between Easy and Fast is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Easy Software AG and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Easy Software 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 Easy Software AG 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 Easy Software i.e., Easy Software and Fast Retailing go up and down completely randomly.

Pair Corralation between Easy Software and Fast Retailing

Assuming the 90 days trading horizon Easy Software AG is expected to generate 1.92 times more return on investment than Fast Retailing. However, Easy Software is 1.92 times more volatile than Fast Retailing Co. It trades about 0.27 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.16 per unit of risk. If you would invest  1,520  in Easy Software AG on October 10, 2024 and sell it today you would earn a total of  280.00  from holding Easy Software AG or generate 18.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.44%
Values	Daily Returns

Easy Software AG  vs.  Fast Retailing Co

Easy Software AG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Easy Software AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Easy Software displayed solid returns over the last few months and may actually be approaching a breakup point.

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 rather sound basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Easy Software and Fast Retailing

The main advantage of trading using opposite Easy Software and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Easy Software 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 Easy Software AG 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.