Correlation Between Diageo Plc and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Diageo Plc 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 Diageo Plc and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo Plc and Fast Retailing Co, you can compare the effects of market volatilities on Diageo Plc 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 Diageo Plc with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo Plc and Fast Retailing.
Diversification Opportunities for Diageo Plc and Fast Retailing
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Diageo and Fast is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Diageo Plc and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Diageo Plc 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 Diageo Plc 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 Diageo Plc i.e., Diageo Plc and Fast Retailing go up and down completely randomly.
Pair Corralation between Diageo Plc and Fast Retailing
Assuming the 90 days trading horizon Diageo Plc is expected to generate 0.79 times more return on investment than Fast Retailing. However, Diageo Plc is 1.26 times less risky than Fast Retailing. It trades about 0.1 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.16 per unit of risk. If you would invest 2,949 in Diageo Plc on October 11, 2024 and sell it today you would earn a total of 84.00 from holding Diageo Plc or generate 2.85% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Diageo Plc vs. Fast Retailing Co
Performance |
Timeline |
Diageo Plc |
Fast Retailing |
Diageo Plc and Fast Retailing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Diageo Plc and Fast Retailing
The main advantage of trading using opposite Diageo Plc and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo Plc 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.Diageo Plc vs. Fast Retailing Co | Diageo Plc vs. OFFICE DEPOT | Diageo Plc vs. Haier Smart Home | Diageo Plc vs. Auto Trader Group |
Fast Retailing vs. WT OFFSHORE | Fast Retailing vs. ENVVENO MEDICAL DL 00001 | Fast Retailing vs. MeVis Medical Solutions | Fast Retailing vs. PEPTONIC MEDICAL |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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