Correlation Between Fast Retailing and Phenixfin

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

Diversification Opportunities for Fast Retailing and Phenixfin

0.08

Correlation Coefficient

Fast Retailing  Phenixfin

Significant diversification

The 3 months correlation between Fast and Phenixfin is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Phenixfin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phenixfin 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 Phenixfin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phenixfin has no effect on the direction of Fast Retailing i.e., Fast Retailing and Phenixfin go up and down completely randomly.

Pair Corralation between Fast Retailing and Phenixfin

Assuming the 90 days horizon Fast Retailing is expected to generate 5.72 times less return on investment than Phenixfin. But when comparing it to its historical volatility, Fast Retailing Co is 1.52 times less risky than Phenixfin. It trades about 0.02 of its potential returns per unit of risk. Phenixfin is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,725  in Phenixfin on October 7, 2024 and sell it today you would earn a total of  175.00  from holding Phenixfin or generate 3.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.56%
Values	Daily Returns

Fast Retailing Co  vs.  Phenixfin

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.

Phenixfin

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Phenixfin are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Phenixfin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fast Retailing and Phenixfin

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

The idea behind Fast Retailing Co and Phenixfin 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.