Correlation Between Fast Retailing and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on Fast Retailing and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Ross Stores.
Diversification Opportunities for Fast Retailing and Ross Stores
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Fast and Ross is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Fast Retailing i.e., Fast Retailing and Ross Stores go up and down completely randomly.
Pair Corralation between Fast Retailing and Ross Stores
Assuming the 90 days trading horizon Fast Retailing is expected to generate 1.33 times less return on investment than Ross Stores. But when comparing it to its historical volatility, Fast Retailing Co is 1.39 times less risky than Ross Stores. It trades about 0.26 of its potential returns per unit of risk. Ross Stores is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 12,860 in Ross Stores on September 5, 2024 and sell it today you would earn a total of 1,906 from holding Ross Stores or generate 14.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Fast Retailing Co vs. Ross Stores
Performance |
Timeline |
Fast Retailing |
Ross Stores |
Fast Retailing and Ross Stores Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fast Retailing and Ross Stores
The main advantage of trading using opposite Fast Retailing and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.Fast Retailing vs. TOTAL GABON | Fast Retailing vs. Walgreens Boots Alliance | Fast Retailing vs. Peak Resources Limited |
Ross Stores vs. TOTAL GABON | Ross Stores vs. Walgreens Boots Alliance | Ross Stores vs. Peak Resources Limited |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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