Correlation Between Fast Retailing and Meiwu Technology

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

Diversification Opportunities for Fast Retailing and Meiwu Technology

0.66

Correlation Coefficient

Fast Retailing  Meiwu Technology

Poor diversification

The 3 months correlation between Fast and Meiwu is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Meiwu Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiwu Technology 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 Meiwu Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meiwu Technology has no effect on the direction of Fast Retailing i.e., Fast Retailing and Meiwu Technology go up and down completely randomly.

Pair Corralation between Fast Retailing and Meiwu Technology

Assuming the 90 days horizon Fast Retailing Co is expected to generate 0.13 times more return on investment than Meiwu Technology. However, Fast Retailing Co is 7.56 times less risky than Meiwu Technology. It trades about -0.04 of its potential returns per unit of risk. Meiwu Technology Co is currently generating about -0.2 per unit of risk. If you would invest  33,260  in Fast Retailing Co on December 27, 2024 and sell it today you would lose (1,659) from holding Fast Retailing Co or give up 4.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Fast Retailing Co  vs.  Meiwu Technology Co

Fast Retailing

Risk-Adjusted Performance

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.

Meiwu Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meiwu Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Fast Retailing and Meiwu Technology

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

The idea behind Fast Retailing Co and Meiwu Technology Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .