Correlation Between Fast Retailing and Thermo Fisher

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

Diversification Opportunities for Fast Retailing and Thermo Fisher

0.18

Correlation Coefficient

Fast Retailing  Thermo Fisher

Average diversification

The 3 months correlation between Fast and Thermo is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Thermo Fisher Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermo Fisher Scientific 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 Thermo Fisher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermo Fisher Scientific has no effect on the direction of Fast Retailing i.e., Fast Retailing and Thermo Fisher go up and down completely randomly.

Pair Corralation between Fast Retailing and Thermo Fisher

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the Thermo Fisher. In addition to that, Fast Retailing is 1.05 times more volatile than Thermo Fisher Scientific. It trades about -0.14 of its total potential returns per unit of risk. Thermo Fisher Scientific is currently generating about -0.05 per unit of volatility. If you would invest  50,078  in Thermo Fisher Scientific on December 21, 2024 and sell it today you would lose (2,648) from holding Thermo Fisher Scientific or give up 5.29% of portfolio value over 90 days.

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

Fast Retailing Co  vs.  Thermo Fisher Scientific

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.

Thermo Fisher Scientific

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thermo Fisher Scientific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Thermo Fisher is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fast Retailing and Thermo Fisher

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

The idea behind Fast Retailing Co and Thermo Fisher Scientific 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.