Correlation Between Fast Retailing and UTD OV

Can any of the company-specific risk be diversified away by investing in both Fast Retailing and UTD OV 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 UTD OV 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 UTD OV BK LOC ADR1, you can compare the effects of market volatilities on Fast Retailing and UTD OV 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 UTD OV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and UTD OV.

Diversification Opportunities for Fast Retailing and UTD OV

0.41

Correlation Coefficient

Fast Retailing  UTD OV

Very weak diversification

The 3 months correlation between Fast and UTD is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and UTD OV BK LOC ADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTD OV BK 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 UTD OV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTD OV BK has no effect on the direction of Fast Retailing i.e., Fast Retailing and UTD OV go up and down completely randomly.

Pair Corralation between Fast Retailing and UTD OV

Assuming the 90 days trading horizon Fast Retailing is expected to generate 1.41 times less return on investment than UTD OV. In addition to that, Fast Retailing is 1.3 times more volatile than UTD OV BK LOC ADR1. It trades about 0.06 of its total potential returns per unit of risk. UTD OV BK LOC ADR1 is currently generating about 0.11 per unit of volatility. If you would invest  4,540  in UTD OV BK LOC ADR1 on September 23, 2024 and sell it today you would earn a total of  510.00  from holding UTD OV BK LOC ADR1 or generate 11.23% return on investment over 90 days.

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

Fast Retailing Co  vs.  UTD OV BK LOC ADR1

Fast Retailing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UTD OV BK

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UTD OV BK LOC ADR1 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, UTD OV may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fast Retailing and UTD OV

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

The idea behind Fast Retailing Co and UTD OV BK LOC ADR1 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.