Correlation Between Fast Retailing and Semler Scientific

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

Diversification Opportunities for Fast Retailing and Semler Scientific

-0.1

Correlation Coefficient

Fast Retailing  Semler Scientific

Good diversification

The 3 months correlation between Fast and Semler is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Semler Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semler Scientific 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 Semler Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semler Scientific has no effect on the direction of Fast Retailing i.e., Fast Retailing and Semler Scientific go up and down completely randomly.

Pair Corralation between Fast Retailing and Semler Scientific

Assuming the 90 days horizon Fast Retailing Co is expected to generate 0.14 times more return on investment than Semler Scientific. However, Fast Retailing Co is 7.0 times less risky than Semler Scientific. It trades about 0.26 of its potential returns per unit of risk. Semler Scientific is currently generating about 0.02 per unit of risk. If you would invest  31,335  in Fast Retailing Co on September 23, 2024 and sell it today you would earn a total of  1,925  from holding Fast Retailing Co or generate 6.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Fast Retailing Co  vs.  Semler Scientific

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 fragile basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Semler Scientific

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semler Scientific are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Semler Scientific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Semler Scientific

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

The idea behind Fast Retailing Co and Semler Scientific 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..