Correlation Between Industria and Fast Retailing

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

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

Diversification Opportunities for Industria and Fast Retailing

0.32

Correlation Coefficient

Industria  Fast Retailing

Weak diversification

The 3 months correlation between Industria and Fast is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseo and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Industria 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 Industria de Diseo 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 Industria i.e., Industria and Fast Retailing go up and down completely randomly.

Pair Corralation between Industria and Fast Retailing

Assuming the 90 days horizon Industria de Diseo is expected to generate 2.02 times more return on investment than Fast Retailing. However, Industria is 2.02 times more volatile than Fast Retailing Co. It trades about 0.04 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.23 per unit of risk. If you would invest  5,171  in Industria de Diseo on October 13, 2024 and sell it today you would earn a total of  81.00  from holding Industria de Diseo or generate 1.57% return on investment over 90 days.

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

Industria de Diseo  vs.  Fast Retailing Co

Industria de Diseo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industria de Diseo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Industria is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Industria and Fast Retailing

The main advantage of trading using opposite Industria and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industria 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 Industria de Diseo 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.