Correlation Between Fast Retailing and BANK RAKYAT

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

Diversification Opportunities for Fast Retailing and BANK RAKYAT

-0.31

Correlation Coefficient

Fast Retailing  BANK RAKYAT

Very good diversification

The 3 months correlation between Fast and BANK is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and BANK RAKYAT IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK RAKYAT IND 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 BANK RAKYAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK RAKYAT IND has no effect on the direction of Fast Retailing i.e., Fast Retailing and BANK RAKYAT go up and down completely randomly.

Pair Corralation between Fast Retailing and BANK RAKYAT

If you would invest  29,770  in Fast Retailing Co on September 5, 2024 and sell it today you would earn a total of  2,690  from holding Fast Retailing Co or generate 9.04% return on investment over 90 days.

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

Fast Retailing Co  vs.  BANK RAKYAT IND

Fast Retailing

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Fast Retailing exhibited solid returns over the last few months and may actually be approaching a breakup point.

BANK RAKYAT IND

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fast Retailing and BANK RAKYAT

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

The idea behind Fast Retailing Co and BANK RAKYAT IND 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.