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 Diseno 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

-0.23

Correlation Coefficient

Industria  Fast Retailing

Very good diversification

The 3 months correlation between Industria and Fast is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseno 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 Diseno 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 Diseno is expected to generate 0.96 times more return on investment than Fast Retailing. However, Industria de Diseno is 1.04 times less risky than Fast Retailing. It trades about -0.01 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.03 per unit of risk. If you would invest  2,568  in Industria de Diseno on December 30, 2024 and sell it today you would lose (46.00) from holding Industria de Diseno or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Industria de Diseno  vs.  Fast Retailing Co

Industria de Diseno

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industria de Diseno has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Industria is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fast Retailing

Risk-Adjusted Performance

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 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 Diseno 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.