Correlation Between Fast Retailing and Buckle

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

Diversification Opportunities for Fast Retailing and Buckle

0.17

Correlation Coefficient

Fast Retailing  Buckle

Average diversification

The 3 months correlation between Fast and Buckle is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Buckle Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buckle 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 Buckle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buckle Inc has no effect on the direction of Fast Retailing i.e., Fast Retailing and Buckle go up and down completely randomly.

Pair Corralation between Fast Retailing and Buckle

Assuming the 90 days horizon Fast Retailing Co is expected to generate 0.91 times more return on investment than Buckle. However, Fast Retailing Co is 1.1 times less risky than Buckle. It trades about 0.07 of its potential returns per unit of risk. Buckle Inc is currently generating about 0.04 per unit of risk. If you would invest  1,989  in Fast Retailing Co on September 25, 2024 and sell it today you would earn a total of  1,391  from holding Fast Retailing Co or generate 69.93% return on investment over 90 days.

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

Fast Retailing Co  vs.  Buckle Inc

Fast Retailing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Buckle Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Buckle Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward-looking signals, Buckle exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Buckle

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

The idea behind Fast Retailing Co and Buckle 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.