Correlation Between Fast Retailing and Chiba Bank

Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Chiba Bank 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 Retailing and Chiba Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fast Retailing Co and Chiba Bank Ltd, you can compare the effects of market volatilities on Fast Retailing and Chiba Bank 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 Retailing with a short position of Chiba Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Chiba Bank.

Diversification Opportunities for Fast Retailing and Chiba Bank

0.23

Correlation Coefficient

Fast Retailing  Chiba Bank

Modest diversification

The 3 months correlation between Fast and Chiba is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Chiba Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank and Fast Retailing 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 Retailing Co are associated (or correlated) with Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of Fast Retailing i.e., Fast Retailing and Chiba Bank go up and down completely randomly.

Pair Corralation between Fast Retailing and Chiba Bank

Assuming the 90 days horizon Fast Retailing Co is expected to generate 3.03 times more return on investment than Chiba Bank. However, Fast Retailing is 3.03 times more volatile than Chiba Bank Ltd. It trades about 0.07 of its potential returns per unit of risk. Chiba Bank Ltd is currently generating about 0.03 per unit of risk. If you would invest  30,332  in Fast Retailing Co on September 5, 2024 and sell it today you would earn a total of  3,258  from holding Fast Retailing Co or generate 10.74% return on investment over 90 days.

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

Fast Retailing Co  vs.  Chiba Bank Ltd

Fast Retailing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fast Retailing reported solid returns over the last few months and may actually be approaching a breakup point.

Chiba Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chiba Bank Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Chiba Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fast Retailing and Chiba Bank

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

The idea behind Fast Retailing Co and Chiba Bank Ltd 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.