Correlation Between Fast Retailing and Abercrombie Fitch
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and Abercrombie Fitch 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 Abercrombie Fitch 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 Abercrombie Fitch, you can compare the effects of market volatilities on Fast Retailing and Abercrombie Fitch 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 Abercrombie Fitch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and Abercrombie Fitch.
Diversification Opportunities for Fast Retailing and Abercrombie Fitch
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and Abercrombie is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Abercrombie Fitch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abercrombie Fitch 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 Abercrombie Fitch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abercrombie Fitch has no effect on the direction of Fast Retailing i.e., Fast Retailing and Abercrombie Fitch go up and down completely randomly.
Pair Corralation between Fast Retailing and Abercrombie Fitch
Assuming the 90 days horizon Fast Retailing is expected to generate 8.62 times less return on investment than Abercrombie Fitch. But when comparing it to its historical volatility, Fast Retailing Co is 1.89 times less risky than Abercrombie Fitch. It trades about 0.01 of its potential returns per unit of risk. Abercrombie Fitch is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 13,793 in Abercrombie Fitch on September 26, 2024 and sell it today you would earn a total of 1,414 from holding Abercrombie Fitch or generate 10.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Fast Retailing Co vs. Abercrombie Fitch
Performance |
Timeline |
Fast Retailing |
Abercrombie Fitch |
Fast Retailing and Abercrombie Fitch Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fast Retailing and Abercrombie Fitch
The main advantage of trading using opposite Fast Retailing and Abercrombie Fitch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Abercrombie Fitch 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 Abercrombie Fitch will offset losses from the drop in Abercrombie Fitch's long position.Fast Retailing vs. Aritzia | Fast Retailing vs. Boot Barn Holdings | Fast Retailing vs. Guess Inc | Fast Retailing vs. The TJX Companies |
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Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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