Correlation Between FAST RETAIL and ArcBest

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

Diversification Opportunities for FAST RETAIL and ArcBest

0.09

Correlation Coefficient

FAST RETAIL  ArcBest

Significant diversification

The 3 months correlation between FAST and ArcBest is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and ArcBest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcBest 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 ArcBest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcBest has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and ArcBest go up and down completely randomly.

Pair Corralation between FAST RETAIL and ArcBest

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to generate 0.81 times more return on investment than ArcBest. However, FAST RETAIL ADR is 1.23 times less risky than ArcBest. It trades about 0.08 of its potential returns per unit of risk. ArcBest is currently generating about -0.4 per unit of risk. If you would invest  3,120  in FAST RETAIL ADR on September 27, 2024 and sell it today you would earn a total of  80.00  from holding FAST RETAIL ADR or generate 2.56% 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.  ArcBest

FAST RETAIL ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FAST RETAIL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ArcBest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcBest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ArcBest 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 RETAIL and ArcBest

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

The idea behind FAST RETAIL ADR and ArcBest 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.