Correlation Between FAST RETAIL and Stitch Fix

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

By analyzing existing cross correlation between FAST RETAIL ADR and Stitch Fix, you can compare the effects of market volatilities on FAST RETAIL and Stitch Fix 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 RETAIL with a short position of Stitch Fix. Check out your portfolio center. Please also check ongoing floating volatility patterns of FAST RETAIL and Stitch Fix.

Diversification Opportunities for FAST RETAIL and Stitch Fix

-0.1

Correlation Coefficient

FAST RETAIL  Stitch Fix

Good diversification

The 3 months correlation between FAST and Stitch is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Stitch Fix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stitch Fix and FAST RETAIL 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 RETAIL ADR are associated (or correlated) with Stitch Fix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stitch Fix has no effect on the direction of FAST RETAIL i.e., FAST RETAIL and Stitch Fix go up and down completely randomly.

Pair Corralation between FAST RETAIL and Stitch Fix

Assuming the 90 days trading horizon FAST RETAIL is expected to generate 2.64 times less return on investment than Stitch Fix. But when comparing it to its historical volatility, FAST RETAIL ADR is 3.31 times less risky than Stitch Fix. It trades about 0.14 of its potential returns per unit of risk. Stitch Fix is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  311.00  in Stitch Fix on September 5, 2024 and sell it today you would earn a total of  107.00  from holding Stitch Fix or generate 34.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

FAST RETAIL ADR  vs.  Stitch Fix

FAST RETAIL ADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FAST RETAIL ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FAST RETAIL reported solid returns over the last few months and may actually be approaching a breakup point.

Stitch Fix

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stitch Fix are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Stitch Fix reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FAST RETAIL and Stitch Fix

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

The idea behind FAST RETAIL ADR and Stitch Fix 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.