Correlation Between FAST RETAIL and FIRST SAVINGS

Can any of the company-specific risk be diversified away by investing in both FAST RETAIL and FIRST SAVINGS 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 FIRST SAVINGS 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 FIRST SAVINGS FINL, you can compare the effects of market volatilities on FAST RETAIL and FIRST SAVINGS 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 FIRST SAVINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and FIRST SAVINGS.

Diversification Opportunities for FAST RETAIL and FIRST SAVINGS

0.08

Correlation Coefficient

FAST RETAIL  FIRST SAVINGS

Significant diversification

The 3 months correlation between FAST and FIRST is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and FIRST SAVINGS FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST SAVINGS FINL 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 FIRST SAVINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIRST SAVINGS FINL has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and FIRST SAVINGS go up and down completely randomly.

Pair Corralation between FAST RETAIL and FIRST SAVINGS

Assuming the 90 days trading horizon FAST RETAIL is expected to generate 2.25 times less return on investment than FIRST SAVINGS. In addition to that, FAST RETAIL is 1.0 times more volatile than FIRST SAVINGS FINL. It trades about 0.04 of its total potential returns per unit of risk. FIRST SAVINGS FINL is currently generating about 0.1 per unit of volatility. If you would invest  1,108  in FIRST SAVINGS FINL on October 22, 2024 and sell it today you would earn a total of  1,172  from holding FIRST SAVINGS FINL or generate 105.78% return on investment over 90 days.

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

FAST RETAIL ADR  vs.  FIRST SAVINGS FINL

FAST RETAIL ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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.

FIRST SAVINGS FINL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FIRST SAVINGS FINL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FIRST SAVINGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FAST RETAIL and FIRST SAVINGS

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

The idea behind FAST RETAIL ADR and FIRST SAVINGS FINL 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.