Correlation Between Fast Retailing and DATAGROUP

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

Diversification Opportunities for Fast Retailing and DATAGROUP

0.57

Correlation Coefficient

Fast Retailing  DATAGROUP

Very weak diversification

The 3 months correlation between Fast and DATAGROUP is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and DATAGROUP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATAGROUP SE 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 DATAGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATAGROUP SE has no effect on the direction of Fast Retailing i.e., Fast Retailing and DATAGROUP go up and down completely randomly.

Pair Corralation between Fast Retailing and DATAGROUP

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the DATAGROUP. But the stock apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 1.43 times less risky than DATAGROUP. The stock trades about -0.15 of its potential returns per unit of risk. The DATAGROUP SE is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,577  in DATAGROUP SE on December 24, 2024 and sell it today you would lose (272.00) from holding DATAGROUP SE or give up 5.94% of portfolio value over 90 days.

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

Fast Retailing Co  vs.  DATAGROUP SE

Fast Retailing

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

DATAGROUP SE

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Fast Retailing and DATAGROUP

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

The idea behind Fast Retailing Co and DATAGROUP SE 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.