Correlation Between Fast Retailing and Biogen

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

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

Diversification Opportunities for Fast Retailing and Biogen

-0.38

Correlation Coefficient

Fast Retailing  Biogen

Very good diversification

The 3 months correlation between Fast and Biogen is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc and Fast Retailing 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 Fast Retailing Co are associated (or correlated) with Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Fast Retailing i.e., Fast Retailing and Biogen go up and down completely randomly.

Pair Corralation between Fast Retailing and Biogen

Assuming the 90 days trading horizon Fast Retailing Co is expected to generate 1.09 times more return on investment than Biogen. However, Fast Retailing is 1.09 times more volatile than Biogen Inc. It trades about 0.07 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.06 per unit of risk. If you would invest  18,833  in Fast Retailing Co on September 18, 2024 and sell it today you would earn a total of  13,427  from holding Fast Retailing Co or generate 71.3% return on investment over 90 days.

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

Fast Retailing Co  vs.  Biogen Inc

Fast Retailing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Fast Retailing exhibited solid returns over the last few months and may actually be approaching a breakup point.

Biogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fast Retailing and Biogen

The main advantage of trading using opposite Fast Retailing and Biogen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, Biogen 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 Biogen will offset losses from the drop in Biogen's long position.

The idea behind Fast Retailing Co and Biogen Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.