Correlation Between Fast Retailing and Capstone Copper

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

Diversification Opportunities for Fast Retailing and Capstone Copper

0.31

Correlation Coefficient

Fast Retailing  Capstone Copper

Weak diversification

The 3 months correlation between Fast and Capstone is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Capstone Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Copper Corp 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 Capstone Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Copper Corp has no effect on the direction of Fast Retailing i.e., Fast Retailing and Capstone Copper go up and down completely randomly.

Pair Corralation between Fast Retailing and Capstone Copper

Assuming the 90 days horizon Fast Retailing Co is expected to generate 3.54 times more return on investment than Capstone Copper. However, Fast Retailing is 3.54 times more volatile than Capstone Copper Corp. It trades about 0.05 of its potential returns per unit of risk. Capstone Copper Corp is currently generating about 0.04 per unit of risk. If you would invest  19,143  in Fast Retailing Co on October 4, 2024 and sell it today you would earn a total of  14,117  from holding Fast Retailing Co or generate 73.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.96%
Values	Daily Returns

Fast Retailing Co  vs.  Capstone Copper Corp

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Capstone Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fast Retailing and Capstone Copper

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

The idea behind Fast Retailing Co and Capstone Copper Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.