Correlation Between Fast Retailing and Everspin Technologies

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

Diversification Opportunities for Fast Retailing and Everspin Technologies

0.17

Correlation Coefficient

Fast Retailing  Everspin Technologies

Average diversification

The 3 months correlation between Fast and Everspin is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Everspin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everspin Technologies 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 Everspin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everspin Technologies has no effect on the direction of Fast Retailing i.e., Fast Retailing and Everspin Technologies go up and down completely randomly.

Pair Corralation between Fast Retailing and Everspin Technologies

Assuming the 90 days horizon Fast Retailing Co is expected to generate 0.94 times more return on investment than Everspin Technologies. However, Fast Retailing Co is 1.07 times less risky than Everspin Technologies. It trades about 0.08 of its potential returns per unit of risk. Everspin Technologies is currently generating about -0.03 per unit of risk. If you would invest  23,116  in Fast Retailing Co on October 1, 2024 and sell it today you would earn a total of  10,144  from holding Fast Retailing Co or generate 43.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.62%
Values	Daily Returns

Fast Retailing Co  vs.  Everspin Technologies

Fast Retailing

Risk-Adjusted Performance

0 of 100

Modest

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.

Everspin Technologies

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Everspin Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Everspin Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Everspin Technologies

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

The idea behind Fast Retailing Co and Everspin Technologies 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.