Correlation Between Genuine Parts and Fast Retailing

Can any of the company-specific risk be diversified away by investing in both Genuine Parts and Fast Retailing 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 Genuine Parts and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Genuine Parts Co and Fast Retailing Co, you can compare the effects of market volatilities on Genuine Parts and Fast Retailing 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 Genuine Parts with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genuine Parts and Fast Retailing.

Diversification Opportunities for Genuine Parts and Fast Retailing

0.71

Correlation Coefficient

Genuine Parts  Fast Retailing

Poor diversification

The 3 months correlation between Genuine and Fast is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Genuine Parts 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 Genuine Parts Co are associated (or correlated) with Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Genuine Parts i.e., Genuine Parts and Fast Retailing go up and down completely randomly.

Pair Corralation between Genuine Parts and Fast Retailing

Considering the 90-day investment horizon Genuine Parts Co is expected to under-perform the Fast Retailing. In addition to that, Genuine Parts is 1.8 times more volatile than Fast Retailing Co. It trades about -0.05 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about -0.04 per unit of volatility. If you would invest  35,041  in Fast Retailing Co on October 7, 2024 and sell it today you would lose (1,781) from holding Fast Retailing Co or give up 5.08% of portfolio value over 90 days.

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

Genuine Parts Co  vs.  Fast Retailing Co

Genuine Parts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genuine Parts Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 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.

Pair Trading with Genuine Parts and Fast Retailing

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

The idea behind Genuine Parts Co and Fast Retailing 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 Stocks Directory module to find actively traded stocks across global markets.