Correlation Between Fast Retailing and Mhlbauer Holding

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

Diversification Opportunities for Fast Retailing and Mhlbauer Holding

-0.12

Correlation Coefficient

Fast Retailing  Mhlbauer Holding

Good diversification

The 3 months correlation between Fast and Mhlbauer is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Mhlbauer Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mhlbauer Holding 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 Mhlbauer Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mhlbauer Holding has no effect on the direction of Fast Retailing i.e., Fast Retailing and Mhlbauer Holding go up and down completely randomly.

Pair Corralation between Fast Retailing and Mhlbauer Holding

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.87 times more return on investment than Mhlbauer Holding. However, Fast Retailing Co is 1.14 times less risky than Mhlbauer Holding. It trades about 0.06 of its potential returns per unit of risk. Mhlbauer Holding AG is currently generating about -0.02 per unit of risk. If you would invest  19,333  in Fast Retailing Co on October 26, 2024 and sell it today you would earn a total of  11,037  from holding Fast Retailing Co or generate 57.09% 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.  Mhlbauer Holding AG

Fast Retailing

Risk-Adjusted Performance

0 of 100

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 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.

Mhlbauer Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mhlbauer Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Mhlbauer Holding 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 Mhlbauer Holding

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

The idea behind Fast Retailing Co and Mhlbauer Holding AG 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.