Correlation Between Fast Retailing and LANDSEA HOMES

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

Diversification Opportunities for Fast Retailing and LANDSEA HOMES

-0.27

Correlation Coefficient

Fast Retailing  LANDSEA HOMES

Very good diversification

The 3 months correlation between Fast and LANDSEA is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and LANDSEA HOMES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LANDSEA HOMES P 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 LANDSEA HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LANDSEA HOMES P has no effect on the direction of Fast Retailing i.e., Fast Retailing and LANDSEA HOMES go up and down completely randomly.

Pair Corralation between Fast Retailing and LANDSEA HOMES

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.84 times more return on investment than LANDSEA HOMES. However, Fast Retailing Co is 1.18 times less risky than LANDSEA HOMES. It trades about -0.02 of its potential returns per unit of risk. LANDSEA HOMES P is currently generating about -0.71 per unit of risk. If you would invest  33,590  in Fast Retailing Co on October 6, 2024 and sell it today you would lose (320.00) from holding Fast Retailing Co or give up 0.95% of portfolio value over 90 days.

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

Fast Retailing Co  vs.  LANDSEA HOMES P

Fast Retailing

Risk-Adjusted Performance

5 of 100

Modest

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

LANDSEA HOMES P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fast Retailing and LANDSEA HOMES

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

The idea behind Fast Retailing Co and LANDSEA HOMES P 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.