Correlation Between Fast Retailing and BANK CIMB

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

Diversification Opportunities for Fast Retailing and BANK CIMB

-0.21

Correlation Coefficient

Fast Retailing  BANK CIMB

Very good diversification

The 3 months correlation between Fast and BANK is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and BANK CIMB NIAGA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK CIMB NIAGA 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 BANK CIMB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK CIMB NIAGA has no effect on the direction of Fast Retailing i.e., Fast Retailing and BANK CIMB go up and down completely randomly.

Pair Corralation between Fast Retailing and BANK CIMB

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.78 times more return on investment than BANK CIMB. However, Fast Retailing Co is 1.28 times less risky than BANK CIMB. It trades about 0.06 of its potential returns per unit of risk. BANK CIMB NIAGA is currently generating about 0.04 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.  BANK CIMB NIAGA

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.

BANK CIMB NIAGA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK CIMB NIAGA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BANK CIMB is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fast Retailing and BANK CIMB

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

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