Correlation Between Kite Realty and Fast Retailing

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

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

Diversification Opportunities for Kite Realty and Fast Retailing

-0.25

Correlation Coefficient

Kite Realty  Fast Retailing

Very good diversification

The 3 months correlation between Kite and Fast is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kite Realty Group and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Kite Realty 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 Kite Realty Group 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 Kite Realty i.e., Kite Realty and Fast Retailing go up and down completely randomly.

Pair Corralation between Kite Realty and Fast Retailing

Considering the 90-day investment horizon Kite Realty is expected to generate 20.85 times less return on investment than Fast Retailing. But when comparing it to its historical volatility, Kite Realty Group is 2.96 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 0.07 of returns per unit of risk over similar time horizon. If you would invest  30,332  in Fast Retailing Co on September 12, 2024 and sell it today you would earn a total of  3,258  from holding Fast Retailing Co or generate 10.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Kite Realty Group  vs.  Fast Retailing Co

Kite Realty Group

Risk-Adjusted Performance

0 of 100

Weak

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

Fast Retailing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fast Retailing reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kite Realty and Fast Retailing

The main advantage of trading using opposite Kite Realty and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kite Realty 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 Kite Realty Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.