Correlation Between Fast Retailing and Williams Sonoma

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

Diversification Opportunities for Fast Retailing and Williams Sonoma

-0.26

Correlation Coefficient

Fast Retailing  Williams Sonoma

Very good diversification

The 3 months correlation between Fast and Williams is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Williams Sonoma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Sonoma 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 Williams Sonoma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Sonoma has no effect on the direction of Fast Retailing i.e., Fast Retailing and Williams Sonoma go up and down completely randomly.

Pair Corralation between Fast Retailing and Williams Sonoma

Assuming the 90 days horizon Fast Retailing Co is expected to under-perform the Williams Sonoma. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 1.83 times less risky than Williams Sonoma. The pink sheet trades about -0.23 of its potential returns per unit of risk. The Williams Sonoma is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  19,138  in Williams Sonoma on October 13, 2024 and sell it today you would earn a total of  559.00  from holding Williams Sonoma or generate 2.92% 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.  Williams Sonoma

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.

Williams Sonoma

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Williams Sonoma are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Williams Sonoma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Williams Sonoma

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

The idea behind Fast Retailing Co and Williams Sonoma 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.