Correlation Between Fast Retailing and Tillys

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

Diversification Opportunities for Fast Retailing and Tillys

0.36

Correlation Coefficient

Fast Retailing  Tillys

Weak diversification

The 3 months correlation between Fast and Tillys is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Tillys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tillys Inc 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 Tillys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tillys Inc has no effect on the direction of Fast Retailing i.e., Fast Retailing and Tillys go up and down completely randomly.

Pair Corralation between Fast Retailing and Tillys

Assuming the 90 days horizon Fast Retailing Co is expected to under-perform the Tillys. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 3.2 times less risky than Tillys. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Tillys Inc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  353.00  in Tillys Inc on October 12, 2024 and sell it today you would earn a total of  72.00  from holding Tillys Inc or generate 20.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Fast Retailing Co  vs.  Tillys Inc

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Tillys Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tillys Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Tillys is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fast Retailing and Tillys

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

The idea behind Fast Retailing Co and Tillys Inc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.