Correlation Between Fast Retailing and SERI INDUSTRIAL

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

Diversification Opportunities for Fast Retailing and SERI INDUSTRIAL

-0.02

Correlation Coefficient

Fast Retailing  SERI INDUSTRIAL

Good diversification

The 3 months correlation between Fast and SERI is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and SERI INDUSTRIAL EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERI INDUSTRIAL EO 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 SERI INDUSTRIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERI INDUSTRIAL EO has no effect on the direction of Fast Retailing i.e., Fast Retailing and SERI INDUSTRIAL go up and down completely randomly.

Pair Corralation between Fast Retailing and SERI INDUSTRIAL

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 0.47 times more return on investment than SERI INDUSTRIAL. However, Fast Retailing Co is 2.12 times less risky than SERI INDUSTRIAL. It trades about 0.06 of its potential returns per unit of risk. SERI INDUSTRIAL EO is currently generating about -0.04 per unit of risk. If you would invest  19,333  in Fast Retailing Co on October 27, 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.  SERI INDUSTRIAL EO

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.

SERI INDUSTRIAL EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SERI INDUSTRIAL EO 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 technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fast Retailing and SERI INDUSTRIAL

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

The idea behind Fast Retailing Co and SERI INDUSTRIAL EO 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.