Correlation Between Fast Retailing and Caseys General

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

Diversification Opportunities for Fast Retailing and Caseys General

0.46

Correlation Coefficient

Fast Retailing  Caseys General

Very weak diversification

The 3 months correlation between Fast and Caseys is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Caseys General Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caseys General Stores 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 Caseys General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caseys General Stores has no effect on the direction of Fast Retailing i.e., Fast Retailing and Caseys General go up and down completely randomly.

Pair Corralation between Fast Retailing and Caseys General

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.14 times more return on investment than Caseys General. However, Fast Retailing is 1.14 times more volatile than Caseys General Stores. It trades about 0.15 of its potential returns per unit of risk. Caseys General Stores is currently generating about 0.13 per unit of risk. If you would invest  27,950  in Fast Retailing Co on September 12, 2024 and sell it today you would earn a total of  5,480  from holding Fast Retailing Co or generate 19.61% return on investment over 90 days.

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

Fast Retailing Co  vs.  Caseys General Stores

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 uncertain basic indicators, Fast Retailing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Caseys General Stores

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caseys General Stores are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caseys General unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Caseys General

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

The idea behind Fast Retailing Co and Caseys General Stores 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.