Correlation Between FAST RETAIL and Liaoning Port

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

Diversification Opportunities for FAST RETAIL and Liaoning Port

-0.34

Correlation Coefficient

FAST RETAIL  Liaoning Port

Very good diversification

The 3 months correlation between FAST and Liaoning is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Liaoning Port CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liaoning Port CoLtd 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 Liaoning Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liaoning Port CoLtd has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and Liaoning Port go up and down completely randomly.

Pair Corralation between FAST RETAIL and Liaoning Port

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to generate 0.8 times more return on investment than Liaoning Port. However, FAST RETAIL ADR is 1.25 times less risky than Liaoning Port. It trades about -0.07 of its potential returns per unit of risk. Liaoning Port CoLtd is currently generating about -0.29 per unit of risk. If you would invest  3,340  in FAST RETAIL ADR on October 8, 2024 and sell it today you would lose (60.00) from holding FAST RETAIL ADR or give up 1.8% of portfolio value over 90 days.

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

FAST RETAIL ADR  vs.  Liaoning Port CoLtd

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 February 2025.

Liaoning Port CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liaoning Port CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with FAST RETAIL and Liaoning Port

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

The idea behind FAST RETAIL ADR and Liaoning Port CoLtd 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.