Correlation Between Fast Retailing and Materialise

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

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

Diversification Opportunities for Fast Retailing and Materialise

0.62

Correlation Coefficient

Fast Retailing  Materialise

Poor diversification

The 3 months correlation between Fast and Materialise is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Materialise NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materialise NV and Fast Retailing 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 Fast Retailing Co are associated (or correlated) with Materialise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materialise NV has no effect on the direction of Fast Retailing i.e., Fast Retailing and Materialise go up and down completely randomly.

Pair Corralation between Fast Retailing and Materialise

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.31 times more return on investment than Materialise. However, Fast Retailing Co is 3.23 times less risky than Materialise. It trades about -0.16 of its potential returns per unit of risk. Materialise NV is currently generating about -0.08 per unit of risk. If you would invest  32,821  in Fast Retailing Co on December 25, 2024 and sell it today you would lose (5,181) from holding Fast Retailing Co or give up 15.79% of portfolio value over 90 days.

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

Fast Retailing Co  vs.  Materialise NV

Fast Retailing

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's basic 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.

Materialise NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Materialise NV 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fast Retailing and Materialise

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

The idea behind Fast Retailing Co and Materialise NV 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.