Correlation Between Fast Retailing and Kite Realty

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

Diversification Opportunities for Fast Retailing and Kite Realty

-0.16

Correlation Coefficient

Fast Retailing  Kite Realty

Good diversification

The 3 months correlation between Fast and Kite is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Kite Realty Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kite Realty Group 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 Kite Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kite Realty Group has no effect on the direction of Fast Retailing i.e., Fast Retailing and Kite Realty go up and down completely randomly.

Pair Corralation between Fast Retailing and Kite Realty

Assuming the 90 days horizon Fast Retailing Co is expected to generate 1.81 times more return on investment than Kite Realty. However, Fast Retailing is 1.81 times more volatile than Kite Realty Group. It trades about 0.05 of its potential returns per unit of risk. Kite Realty Group is currently generating about 0.08 per unit of risk. If you would invest  33,100  in Fast Retailing Co on September 5, 2024 and sell it today you would earn a total of  490.00  from holding Fast Retailing Co or generate 1.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Fast Retailing Co  vs.  Kite Realty Group

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.

Kite Realty Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kite Realty Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Kite Realty is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fast Retailing and Kite Realty

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

The idea behind Fast Retailing Co and Kite Realty Group 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.