Correlation Between Fast Retailing and Adidas AG

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

Diversification Opportunities for Fast Retailing and Adidas AG

0.67

Correlation Coefficient

Fast Retailing  Adidas AG

Poor diversification

The 3 months correlation between Fast and Adidas is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and adidas AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on adidas AG 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 Adidas AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of adidas AG has no effect on the direction of Fast Retailing i.e., Fast Retailing and Adidas AG go up and down completely randomly.

Pair Corralation between Fast Retailing and Adidas AG

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the Adidas AG. In addition to that, Fast Retailing is 1.29 times more volatile than adidas AG. It trades about -0.14 of its total potential returns per unit of risk. adidas AG is currently generating about 0.07 per unit of volatility. If you would invest  11,800  in adidas AG on October 11, 2024 and sell it today you would earn a total of  200.00  from holding adidas AG or generate 1.69% return on investment over 90 days.

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

Fast Retailing Co  vs.  adidas AG

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.

adidas AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in adidas AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Adidas AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fast Retailing and Adidas AG

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

The idea behind Fast Retailing Co and adidas AG 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 Commodity Directory module to find actively traded commodities issued by global exchanges.