Correlation Between Varta AG and Fast Retailing

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

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

Diversification Opportunities for Varta AG and Fast Retailing

-0.07

Correlation Coefficient

Varta AG  Fast Retailing

Good diversification

The 3 months correlation between Varta and Fast is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Varta AG 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 Varta AG 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 Varta AG i.e., Varta AG and Fast Retailing go up and down completely randomly.

Pair Corralation between Varta AG and Fast Retailing

Assuming the 90 days trading horizon Varta AG is expected to generate 1.78 times more return on investment than Fast Retailing. However, Varta AG is 1.78 times more volatile than Fast Retailing Co. It trades about 0.0 of its potential returns per unit of risk. Fast Retailing Co is currently generating about -0.22 per unit of risk. If you would invest  152.00  in Varta AG on October 22, 2024 and sell it today you would lose (2.00) from holding Varta AG or give up 1.32% of portfolio value over 90 days.

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

Varta AG  vs.  Fast Retailing Co

Varta AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Fast Retailing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Fast Retailing is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Varta AG and Fast Retailing

The main advantage of trading using opposite Varta AG and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG 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 Varta AG 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.