Correlation Between Fast Retailing and SBM Offshore

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

Diversification Opportunities for Fast Retailing and SBM Offshore

-0.01

Correlation Coefficient

Fast Retailing  SBM Offshore

Good diversification

The 3 months correlation between Fast and SBM is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and SBM Offshore NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM Offshore NV 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 SBM Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM Offshore NV has no effect on the direction of Fast Retailing i.e., Fast Retailing and SBM Offshore go up and down completely randomly.

Pair Corralation between Fast Retailing and SBM Offshore

Assuming the 90 days horizon Fast Retailing is expected to generate 1.06 times less return on investment than SBM Offshore. In addition to that, Fast Retailing is 1.05 times more volatile than SBM Offshore NV. It trades about 0.07 of its total potential returns per unit of risk. SBM Offshore NV is currently generating about 0.08 per unit of volatility. If you would invest  1,245  in SBM Offshore NV on September 12, 2024 and sell it today you would earn a total of  445.00  from holding SBM Offshore NV or generate 35.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

Fast Retailing Co  vs.  SBM Offshore NV

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.

SBM Offshore NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SBM Offshore NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SBM Offshore 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 SBM Offshore

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

The idea behind Fast Retailing Co and SBM Offshore NV 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.