Correlation Between Fast Retailing and ALLTEL

Can any of the company-specific risk be diversified away by investing in both Fast Retailing and ALLTEL 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 ALLTEL 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 ALLTEL P 7875, you can compare the effects of market volatilities on Fast Retailing and ALLTEL 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 ALLTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and ALLTEL.

Diversification Opportunities for Fast Retailing and ALLTEL

-0.07

Correlation Coefficient

Fast Retailing  ALLTEL

Good diversification

The 3 months correlation between Fast and ALLTEL is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and ALLTEL P 7875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALLTEL P 7875 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 ALLTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALLTEL P 7875 has no effect on the direction of Fast Retailing i.e., Fast Retailing and ALLTEL go up and down completely randomly.

Pair Corralation between Fast Retailing and ALLTEL

Assuming the 90 days horizon Fast Retailing Co is expected to generate 1.08 times more return on investment than ALLTEL. However, Fast Retailing is 1.08 times more volatile than ALLTEL P 7875. It trades about -0.04 of its potential returns per unit of risk. ALLTEL P 7875 is currently generating about -0.18 per unit of risk. If you would invest  35,041  in Fast Retailing Co on October 7, 2024 and sell it today you would lose (1,781) from holding Fast Retailing Co or give up 5.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	34.92%
Values	Daily Returns

Fast Retailing Co  vs.  ALLTEL P 7875

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.

ALLTEL P 7875

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALLTEL P 7875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for ALLTEL P 7875 investors.

Pair Trading with Fast Retailing and ALLTEL

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

The idea behind Fast Retailing Co and ALLTEL P 7875 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.