Correlation Between ALERION CLEANPOWER and Fast Retailing

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

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

Diversification Opportunities for ALERION CLEANPOWER and Fast Retailing

0.52

Correlation Coefficient

ALERION CLEANPOWER  Fast Retailing

Very weak diversification

The 3 months correlation between ALERION and Fast is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding ALERION CLEANPOWER and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and ALERION CLEANPOWER 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 ALERION CLEANPOWER 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 ALERION CLEANPOWER i.e., ALERION CLEANPOWER and Fast Retailing go up and down completely randomly.

Pair Corralation between ALERION CLEANPOWER and Fast Retailing

Assuming the 90 days trading horizon ALERION CLEANPOWER is expected to under-perform the Fast Retailing. But the stock apears to be less risky and, when comparing its historical volatility, ALERION CLEANPOWER is 1.14 times less risky than Fast Retailing. The stock trades about -0.19 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  33,430  in Fast Retailing Co on October 11, 2024 and sell it today you would lose (2,040) from holding Fast Retailing Co or give up 6.1% of portfolio value over 90 days.

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

ALERION CLEANPOWER  vs.  Fast Retailing Co

ALERION CLEANPOWER

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ALERION CLEANPOWER are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ALERION CLEANPOWER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fast Retailing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Fast Retailing is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ALERION CLEANPOWER and Fast Retailing

The main advantage of trading using opposite ALERION CLEANPOWER and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALERION CLEANPOWER 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 ALERION CLEANPOWER 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.