Correlation Between Fast Retailing and Haleon PLC

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

Diversification Opportunities for Fast Retailing and Haleon PLC

0.53

Correlation Coefficient

Fast Retailing  Haleon PLC

Very weak diversification

The 3 months correlation between Fast and Haleon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Haleon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haleon PLC 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 Haleon PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haleon PLC has no effect on the direction of Fast Retailing i.e., Fast Retailing and Haleon PLC go up and down completely randomly.

Pair Corralation between Fast Retailing and Haleon PLC

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the Haleon PLC. In addition to that, Fast Retailing is 1.76 times more volatile than Haleon PLC. It trades about -0.02 of its total potential returns per unit of risk. Haleon PLC is currently generating about 0.07 per unit of volatility. If you would invest  890.00  in Haleon PLC on October 6, 2024 and sell it today you would earn a total of  10.00  from holding Haleon PLC or generate 1.12% 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.  Haleon PLC

Fast Retailing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Haleon PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Haleon PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Haleon PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fast Retailing and Haleon PLC

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

The idea behind Fast Retailing Co and Haleon PLC 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.