Correlation Between FAST RETAIL and HomeToGo

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

Diversification Opportunities for FAST RETAIL and HomeToGo

-0.34

Correlation Coefficient

FAST RETAIL  HomeToGo

Very good diversification

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

Pair Corralation between FAST RETAIL and HomeToGo

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the HomeToGo. But the stock apears to be less risky and, when comparing its historical volatility, FAST RETAIL ADR is 1.34 times less risky than HomeToGo. The stock trades about -0.21 of its potential returns per unit of risk. The HomeToGo SE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  197.00  in HomeToGo SE on October 22, 2024 and sell it today you would earn a total of  8.00  from holding HomeToGo SE or generate 4.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

FAST RETAIL ADR  vs.  HomeToGo SE

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.

HomeToGo SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HomeToGo SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with FAST RETAIL and HomeToGo

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

The idea behind FAST RETAIL ADR and HomeToGo SE 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.