Correlation Between Fast Retailing and MYT Netherlands

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

Diversification Opportunities for Fast Retailing and MYT Netherlands

0.02

Correlation Coefficient

Fast Retailing  MYT Netherlands

Significant diversification

The 3 months correlation between Fast and MYT is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and MYT Netherlands Parent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MYT Netherlands Parent 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 MYT Netherlands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MYT Netherlands Parent has no effect on the direction of Fast Retailing i.e., Fast Retailing and MYT Netherlands go up and down completely randomly.

Pair Corralation between Fast Retailing and MYT Netherlands

Assuming the 90 days horizon Fast Retailing is expected to generate 7.12 times less return on investment than MYT Netherlands. But when comparing it to its historical volatility, Fast Retailing Co is 2.63 times less risky than MYT Netherlands. It trades about 0.04 of its potential returns per unit of risk. MYT Netherlands Parent is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  273.00  in MYT Netherlands Parent on October 7, 2024 and sell it today you would earn a total of  451.00  from holding MYT Netherlands Parent or generate 165.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.48%
Values	Daily Returns

Fast Retailing Co  vs.  MYT Netherlands Parent

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.

MYT Netherlands Parent

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MYT Netherlands Parent are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MYT Netherlands may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fast Retailing and MYT Netherlands

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

The idea behind Fast Retailing Co and MYT Netherlands Parent 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.