Correlation Between Shoe Carnival and Fast Retailing

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

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

Diversification Opportunities for Shoe Carnival and Fast Retailing

0.68

Correlation Coefficient

Shoe Carnival  Fast Retailing

Poor diversification

The 3 months correlation between Shoe and Fast is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shoe Carnival and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Shoe Carnival 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 Shoe Carnival 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 Shoe Carnival i.e., Shoe Carnival and Fast Retailing go up and down completely randomly.

Pair Corralation between Shoe Carnival and Fast Retailing

Given the investment horizon of 90 days Shoe Carnival is expected to under-perform the Fast Retailing. In addition to that, Shoe Carnival is 1.35 times more volatile than Fast Retailing Co. It trades about -0.25 of its total potential returns per unit of risk. Fast Retailing Co is currently generating about -0.04 per unit of volatility. If you would invest  32,065  in Fast Retailing Co on November 28, 2024 and sell it today you would lose (1,615) from holding Fast Retailing Co or give up 5.04% of portfolio value over 90 days.

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

Shoe Carnival  vs.  Fast Retailing Co

Shoe Carnival

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shoe Carnival 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 quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 Shoe Carnival and Fast Retailing

The main advantage of trading using opposite Shoe Carnival and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoe Carnival 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 Shoe Carnival 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .