Correlation Between Fast Retailing and ChargePoint Holdings

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

Diversification Opportunities for Fast Retailing and ChargePoint Holdings

0.49

Correlation Coefficient

Fast Retailing  ChargePoint Holdings

Very weak diversification

The 3 months correlation between Fast and ChargePoint is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and ChargePoint Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChargePoint Holdings 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 ChargePoint Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChargePoint Holdings has no effect on the direction of Fast Retailing i.e., Fast Retailing and ChargePoint Holdings go up and down completely randomly.

Pair Corralation between Fast Retailing and ChargePoint Holdings

Assuming the 90 days horizon Fast Retailing Co is expected to generate 0.37 times more return on investment than ChargePoint Holdings. However, Fast Retailing Co is 2.71 times less risky than ChargePoint Holdings. It trades about -0.04 of its potential returns per unit of risk. ChargePoint Holdings is currently generating about -0.06 per unit of risk. If you would invest  35,041  in Fast Retailing Co on October 7, 2024 and sell it today you would lose (1,781) from holding Fast Retailing Co or give up 5.08% of portfolio value over 90 days.

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

Fast Retailing Co  vs.  ChargePoint Holdings

Fast Retailing

Risk-Adjusted Performance

0 of 100

Very Weak

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

ChargePoint Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChargePoint Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fast Retailing and ChargePoint Holdings

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

The idea behind Fast Retailing Co and ChargePoint Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.