Correlation Between Fast Retailing and Gap,

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

Diversification Opportunities for Fast Retailing and Gap,

0.14

Correlation Coefficient

Fast Retailing  Gap,

Average diversification

The 3 months correlation between Fast and Gap, is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and The Gap, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gap, 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 Gap,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gap, has no effect on the direction of Fast Retailing i.e., Fast Retailing and Gap, go up and down completely randomly.

Pair Corralation between Fast Retailing and Gap,

Assuming the 90 days horizon Fast Retailing is expected to generate 6.32 times less return on investment than Gap,. In addition to that, Fast Retailing is 1.06 times more volatile than The Gap,. It trades about 0.01 of its total potential returns per unit of risk. The Gap, is currently generating about 0.05 per unit of volatility. If you would invest  2,266  in The Gap, on September 2, 2024 and sell it today you would earn a total of  159.00  from holding The Gap, or generate 7.02% return on investment over 90 days.

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

Fast Retailing Co  vs.  The Gap,

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. Despite nearly stable basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Gap,

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Gap, may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fast Retailing and Gap,

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

The idea behind Fast Retailing Co and The Gap, 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.