Correlation Between Fast Retailing and KYB CORPORATION

Can any of the company-specific risk be diversified away by investing in both Fast Retailing and KYB CORPORATION 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 KYB CORPORATION 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 KYB PORATION, you can compare the effects of market volatilities on Fast Retailing and KYB CORPORATION 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 KYB CORPORATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and KYB CORPORATION.

Diversification Opportunities for Fast Retailing and KYB CORPORATION

0.07

Correlation Coefficient

Fast Retailing  KYB CORPORATION

Significant diversification

The 3 months correlation between Fast and KYB is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and KYB PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KYB CORPORATION 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 KYB CORPORATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KYB CORPORATION has no effect on the direction of Fast Retailing i.e., Fast Retailing and KYB CORPORATION go up and down completely randomly.

Pair Corralation between Fast Retailing and KYB CORPORATION

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the KYB CORPORATION. In addition to that, Fast Retailing is 1.81 times more volatile than KYB PORATION. It trades about -0.12 of its total potential returns per unit of risk. KYB PORATION is currently generating about 0.09 per unit of volatility. If you would invest  1,730  in KYB PORATION on December 18, 2024 and sell it today you would earn a total of  90.00  from holding KYB PORATION or generate 5.2% return on investment over 90 days.

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

Fast Retailing Co  vs.  KYB PORATION

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 unsteady 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.

KYB CORPORATION

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KYB PORATION are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KYB CORPORATION is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fast Retailing and KYB CORPORATION

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

The idea behind Fast Retailing Co and KYB PORATION 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.