Correlation Between Fast Retailing and China Resources

Can any of the company-specific risk be diversified away by investing in both Fast Retailing and China Resources 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 China Resources 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 China Resources Power, you can compare the effects of market volatilities on Fast Retailing and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and China Resources.

Diversification Opportunities for Fast Retailing and China Resources

-0.32

Correlation Coefficient

Fast Retailing  China Resources

Very good diversification

The 3 months correlation between Fast and China is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Power has no effect on the direction of Fast Retailing i.e., Fast Retailing and China Resources go up and down completely randomly.

Pair Corralation between Fast Retailing and China Resources

If you would invest  30,065  in Fast Retailing Co on September 22, 2024 and sell it today you would earn a total of  3,195  from holding Fast Retailing Co or generate 10.63% 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.  China Resources Power

Fast Retailing

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Resources Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, China Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fast Retailing and China Resources

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

The idea behind Fast Retailing Co and China Resources Power 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.