Correlation Between FLOW TRADERS and Fast Retailing

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

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

Diversification Opportunities for FLOW TRADERS and Fast Retailing

0.64

Correlation Coefficient

FLOW TRADERS  Fast Retailing

Poor diversification

The 3 months correlation between FLOW and Fast is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding FLOW TRADERS LTD and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and FLOW TRADERS 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 FLOW TRADERS LTD 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 FLOW TRADERS i.e., FLOW TRADERS and Fast Retailing go up and down completely randomly.

Pair Corralation between FLOW TRADERS and Fast Retailing

Assuming the 90 days horizon FLOW TRADERS is expected to generate 1.89 times less return on investment than Fast Retailing. In addition to that, FLOW TRADERS is 1.15 times more volatile than Fast Retailing Co. It trades about 0.04 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about 0.09 per unit of volatility. If you would invest  25,460  in Fast Retailing Co on September 9, 2024 and sell it today you would earn a total of  7,310  from holding Fast Retailing Co or generate 28.71% return on investment over 90 days.

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

FLOW TRADERS LTD  vs.  Fast Retailing Co

FLOW TRADERS LTD

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FLOW TRADERS LTD are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FLOW TRADERS reported solid returns over the last few months and may actually be approaching a breakup point.

Fast Retailing

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Fast Retailing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FLOW TRADERS and Fast Retailing

The main advantage of trading using opposite FLOW TRADERS and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLOW TRADERS 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 FLOW TRADERS LTD 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.