Correlation Between FAST RETAIL and Zoetis

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

Diversification Opportunities for FAST RETAIL and Zoetis

0.29

Correlation Coefficient

FAST RETAIL  Zoetis

Modest diversification

The 3 months correlation between FAST and Zoetis is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Zoetis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoetis Inc 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 Zoetis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoetis Inc has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and Zoetis go up and down completely randomly.

Pair Corralation between FAST RETAIL and Zoetis

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the Zoetis. In addition to that, FAST RETAIL is 1.05 times more volatile than Zoetis Inc. It trades about -0.16 of its total potential returns per unit of risk. Zoetis Inc is currently generating about 0.03 per unit of volatility. If you would invest  15,735  in Zoetis Inc on December 2, 2024 and sell it today you would earn a total of  305.00  from holding Zoetis Inc or generate 1.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

FAST RETAIL ADR  vs.  Zoetis Inc

FAST RETAIL ADR

Risk-Adjusted Performance

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 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.

Zoetis Inc

Risk-Adjusted Performance

Very Weak

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

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

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