Correlation Between Fast Retailing and Alphabet

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

Diversification Opportunities for Fast Retailing and Alphabet

0.13

Correlation Coefficient

Fast Retailing  Alphabet

Average diversification

The 3 months correlation between Fast and Alphabet is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Alphabet Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Fast Retailing i.e., Fast Retailing and Alphabet go up and down completely randomly.

Pair Corralation between Fast Retailing and Alphabet

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the Alphabet. In addition to that, Fast Retailing is 1.09 times more volatile than Alphabet Class A. It trades about -0.01 of its total potential returns per unit of risk. Alphabet Class A is currently generating about 0.21 per unit of volatility. If you would invest  15,055  in Alphabet Class A on October 23, 2024 and sell it today you would earn a total of  3,845  from holding Alphabet Class A or generate 25.54% 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.  Alphabet Class A

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Alphabet Class A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Class A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Alphabet exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Alphabet

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

The idea behind Fast Retailing Co and Alphabet Class A 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.