Correlation Between Fast Retailing and AIR PRODCHEMICALS

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

Diversification Opportunities for Fast Retailing and AIR PRODCHEMICALS

0.32

Correlation Coefficient

Fast Retailing  AIR PRODCHEMICALS

Weak diversification

The 3 months correlation between Fast and AIR is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of Fast Retailing i.e., Fast Retailing and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between Fast Retailing and AIR PRODCHEMICALS

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 2.72 times more return on investment than AIR PRODCHEMICALS. However, Fast Retailing is 2.72 times more volatile than AIR PRODCHEMICALS. It trades about 0.04 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about -1.03 per unit of risk. If you would invest  33,080  in Fast Retailing Co on October 5, 2024 and sell it today you would earn a total of  340.00  from holding Fast Retailing Co or generate 1.03% return on investment over 90 days.

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

Fast Retailing Co  vs.  AIR PRODCHEMICALS

Fast Retailing

Risk-Adjusted Performance

0 of 100

OK

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 uncertain basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AIR PRODCHEMICALS

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days AIR PRODCHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AIR PRODCHEMICALS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fast Retailing and AIR PRODCHEMICALS

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

The idea behind Fast Retailing Co and AIR PRODCHEMICALS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.