Correlation Between Fast Retailing and Boot Barn

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

Diversification Opportunities for Fast Retailing and Boot Barn

0.51

Correlation Coefficient

Fast Retailing  Boot Barn

Very weak diversification

The 3 months correlation between Fast and Boot is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Boot Barn Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boot Barn Holdings 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 Boot Barn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boot Barn Holdings has no effect on the direction of Fast Retailing i.e., Fast Retailing and Boot Barn go up and down completely randomly.

Pair Corralation between Fast Retailing and Boot Barn

Assuming the 90 days horizon Fast Retailing is expected to generate 1.71 times less return on investment than Boot Barn. But when comparing it to its historical volatility, Fast Retailing Co is 1.63 times less risky than Boot Barn. It trades about 0.07 of its potential returns per unit of risk. Boot Barn Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,424  in Boot Barn Holdings on September 25, 2024 and sell it today you would earn a total of  8,374  from holding Boot Barn Holdings or generate 130.35% 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.  Boot Barn Holdings

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.

Boot Barn Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boot Barn Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Fast Retailing and Boot Barn

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

The idea behind Fast Retailing Co and Boot Barn Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.