Correlation Between Fast Retailing and Airports

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

Diversification Opportunities for Fast Retailing and Airports

0.79

Correlation Coefficient

Fast Retailing  Airports

Poor diversification

The 3 months correlation between Fast and Airports is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand 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 Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Fast Retailing i.e., Fast Retailing and Airports go up and down completely randomly.

Pair Corralation between Fast Retailing and Airports

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.58 times more return on investment than Airports. However, Fast Retailing Co is 1.73 times less risky than Airports. It trades about -0.13 of its potential returns per unit of risk. Airports of Thailand is currently generating about -0.22 per unit of risk. If you would invest  32,821  in Fast Retailing Co on December 27, 2024 and sell it today you would lose (4,531) from holding Fast Retailing Co or give up 13.81% of portfolio value over 90 days.

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

Fast Retailing Co  vs.  Airports of Thailand

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 uncertain 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.

Airports of Thailand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Airports of Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fast Retailing and Airports

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

The idea behind Fast Retailing Co and Airports of Thailand 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.