Correlation Between Fast Retailing and Halliburton

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

Diversification Opportunities for Fast Retailing and Halliburton

-0.07

Correlation Coefficient

Fast Retailing  Halliburton

Good diversification

The 3 months correlation between Fast and Halliburton is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of Fast Retailing i.e., Fast Retailing and Halliburton go up and down completely randomly.

Pair Corralation between Fast Retailing and Halliburton

Assuming the 90 days trading horizon Fast Retailing is expected to generate 8.13 times less return on investment than Halliburton. But when comparing it to its historical volatility, Fast Retailing Co is 1.06 times less risky than Halliburton. It trades about 0.01 of its potential returns per unit of risk. Halliburton is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,562  in Halliburton on October 24, 2024 and sell it today you would earn a total of  317.00  from holding Halliburton or generate 12.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Fast Retailing Co  vs.  Halliburton

Fast Retailing

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Halliburton

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Halliburton are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Halliburton unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Halliburton

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

The idea behind Fast Retailing Co and Halliburton 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.