Correlation Between FAST RETAIL and Beazley PLC

Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and Beazley PLC 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 RETAIL and Beazley PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FAST RETAIL ADR and Beazley PLC, you can compare the effects of market volatilities on FAST RETAIL and Beazley PLC 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 RETAIL with a short position of Beazley PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and Beazley PLC.

Diversification Opportunities for FAST RETAIL and Beazley PLC

0.68

Correlation Coefficient

FAST RETAIL  Beazley PLC

Poor diversification

The 3 months correlation between FAST and Beazley is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Beazley PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazley PLC and FAST RETAIL 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 RETAIL ADR are associated (or correlated) with Beazley PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazley PLC has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and Beazley PLC go up and down completely randomly.

Pair Corralation between FAST RETAIL and Beazley PLC

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to generate 0.81 times more return on investment than Beazley PLC. However, FAST RETAIL ADR is 1.24 times less risky than Beazley PLC. It trades about 0.07 of its potential returns per unit of risk. Beazley PLC is currently generating about 0.04 per unit of risk. If you would invest  1,716  in FAST RETAIL ADR on October 11, 2024 and sell it today you would earn a total of  1,404  from holding FAST RETAIL ADR or generate 81.82% return on investment over 90 days.

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

FAST RETAIL ADR  vs.  Beazley PLC

FAST RETAIL ADR

Risk-Adjusted Performance

0 of 100

Modest

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

Beazley PLC

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beazley PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Beazley PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FAST RETAIL and Beazley PLC

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

The idea behind FAST RETAIL ADR and Beazley PLC 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.