Correlation Between Fast Retailing and Ocean Biomedical

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

Diversification Opportunities for Fast Retailing and Ocean Biomedical

0.03

Correlation Coefficient

Fast Retailing  Ocean Biomedical

Significant diversification

The 3 months correlation between Fast and Ocean is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Ocean Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocean Biomedical 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 Ocean Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocean Biomedical has no effect on the direction of Fast Retailing i.e., Fast Retailing and Ocean Biomedical go up and down completely randomly.

Pair Corralation between Fast Retailing and Ocean Biomedical

Assuming the 90 days horizon Fast Retailing is expected to generate 18.37 times less return on investment than Ocean Biomedical. But when comparing it to its historical volatility, Fast Retailing Co is 11.78 times less risky than Ocean Biomedical. It trades about 0.06 of its potential returns per unit of risk. Ocean Biomedical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2.01  in Ocean Biomedical on October 6, 2024 and sell it today you would earn a total of  0.54  from holding Ocean Biomedical or generate 26.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.39%
Values	Daily Returns

Fast Retailing Co  vs.  Ocean Biomedical

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.

Ocean Biomedical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ocean Biomedical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ocean Biomedical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Ocean Biomedical

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

The idea behind Fast Retailing Co and Ocean Biomedical 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 CEOs Directory module to screen CEOs from public companies around the world.