Correlation Between RETAIL FOOD and FAST RETAIL

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Can any of the company-specific risk be diversified away by investing in both RETAIL FOOD and FAST RETAIL 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 RETAIL FOOD and FAST RETAIL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RETAIL FOOD GROUP and FAST RETAIL ADR, you can compare the effects of market volatilities on RETAIL FOOD and FAST RETAIL 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 RETAIL FOOD with a short position of FAST RETAIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and FAST RETAIL.

Diversification Opportunities for RETAIL FOOD and FAST RETAIL

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between RETAIL and FAST is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and FAST RETAIL ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAST RETAIL ADR and RETAIL FOOD 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 RETAIL FOOD GROUP are associated (or correlated) with FAST RETAIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAST RETAIL ADR has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and FAST RETAIL go up and down completely randomly.

Pair Corralation between RETAIL FOOD and FAST RETAIL

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to generate 1.36 times more return on investment than FAST RETAIL. However, RETAIL FOOD is 1.36 times more volatile than FAST RETAIL ADR. It trades about 0.06 of its potential returns per unit of risk. FAST RETAIL ADR is currently generating about 0.08 per unit of risk. If you would invest  2.70  in RETAIL FOOD GROUP on September 10, 2024 and sell it today you would earn a total of  1.25  from holding RETAIL FOOD GROUP or generate 46.3% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

RETAIL FOOD GROUP  vs.  FAST RETAIL ADR

 Performance 
       Timeline  
RETAIL FOOD GROUP 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in RETAIL FOOD GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, RETAIL FOOD is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.
FAST RETAIL ADR 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FAST RETAIL reported solid returns over the last few months and may actually be approaching a breakup point.

RETAIL FOOD and FAST RETAIL Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RETAIL FOOD and FAST RETAIL

The main advantage of trading using opposite RETAIL FOOD and FAST RETAIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD position performs unexpectedly, FAST RETAIL 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 RETAIL will offset losses from the drop in FAST RETAIL's long position.
The idea behind RETAIL FOOD GROUP and FAST RETAIL ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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