Correlation Between FAST RETAIL and ETFS Coffee

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

Diversification Opportunities for FAST RETAIL and ETFS Coffee

0.62

Correlation Coefficient

FAST RETAIL  ETFS Coffee

Poor diversification

The 3 months correlation between FAST and ETFS is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and ETFS Coffee ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETFS Coffee ETC 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 ETFS Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETFS Coffee ETC has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and ETFS Coffee go up and down completely randomly.

Pair Corralation between FAST RETAIL and ETFS Coffee

Assuming the 90 days trading horizon FAST RETAIL is expected to generate 3.42 times less return on investment than ETFS Coffee. But when comparing it to its historical volatility, FAST RETAIL ADR is 1.78 times less risky than ETFS Coffee. It trades about 0.14 of its potential returns per unit of risk. ETFS Coffee ETC is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,908  in ETFS Coffee ETC on October 7, 2024 and sell it today you would earn a total of  1,273  from holding ETFS Coffee ETC or generate 32.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.31%
Values	Daily Returns

FAST RETAIL ADR  vs.  ETFS Coffee ETC

FAST RETAIL ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 5 (%) 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.

ETFS Coffee ETC

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days ETFS Coffee ETC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FAST RETAIL and ETFS Coffee

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

The idea behind FAST RETAIL ADR and ETFS Coffee ETC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.