Correlation Between FAST RETAIL and Hitachi Zosen

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

Diversification Opportunities for FAST RETAIL and Hitachi Zosen

-0.27

Correlation Coefficient

FAST RETAIL  Hitachi Zosen

Very good diversification

The 3 months correlation between FAST and Hitachi is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Hitachi Zosen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Zosen 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 Hitachi Zosen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Zosen has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and Hitachi Zosen go up and down completely randomly.

Pair Corralation between FAST RETAIL and Hitachi Zosen

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to generate 0.93 times more return on investment than Hitachi Zosen. However, FAST RETAIL ADR is 1.07 times less risky than Hitachi Zosen. It trades about 0.07 of its potential returns per unit of risk. Hitachi Zosen is currently generating about 0.01 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 Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

FAST RETAIL ADR  vs.  Hitachi Zosen

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.

Hitachi Zosen

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with FAST RETAIL and Hitachi Zosen

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

The idea behind FAST RETAIL ADR and Hitachi Zosen 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.