Correlation Between Zumiez and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Zumiez 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 Zumiez and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zumiez Inc and Fast Retailing Co, you can compare the effects of market volatilities on Zumiez 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 Zumiez with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zumiez and Fast Retailing.
Diversification Opportunities for Zumiez and Fast Retailing
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Zumiez and Fast is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Zumiez 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 Zumiez Inc 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 Zumiez i.e., Zumiez and Fast Retailing go up and down completely randomly.
Pair Corralation between Zumiez and Fast Retailing
Given the investment horizon of 90 days Zumiez is expected to generate 43.42 times less return on investment than Fast Retailing. But when comparing it to its historical volatility, Zumiez Inc is 3.63 times less risky than Fast Retailing. It trades about 0.0 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 19,143 in Fast Retailing Co on September 25, 2024 and sell it today you would earn a total of 14,117 from holding Fast Retailing Co or generate 73.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 76.01% |
Values | Daily Returns |
Zumiez Inc vs. Fast Retailing Co
Performance |
Timeline |
Zumiez Inc |
Fast Retailing |
Zumiez and Fast Retailing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Zumiez and Fast Retailing
The main advantage of trading using opposite Zumiez and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zumiez 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 Zumiez Inc 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.Fast Retailing vs. Industria de Diseno | Fast Retailing vs. Aritzia | Fast Retailing vs. Shoe Carnival | Fast Retailing vs. Genesco |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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