Correlation Between Fast Retailing and Tradeweb Markets

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

Diversification Opportunities for Fast Retailing and Tradeweb Markets

0.68

Correlation Coefficient

Fast Retailing  Tradeweb Markets

Poor diversification

The 3 months correlation between Fast and Tradeweb is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Tradeweb Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradeweb Markets 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 Tradeweb Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradeweb Markets has no effect on the direction of Fast Retailing i.e., Fast Retailing and Tradeweb Markets go up and down completely randomly.

Pair Corralation between Fast Retailing and Tradeweb Markets

Assuming the 90 days horizon Fast Retailing is expected to generate 10.02 times less return on investment than Tradeweb Markets. In addition to that, Fast Retailing is 2.34 times more volatile than Tradeweb Markets. It trades about 0.01 of its total potential returns per unit of risk. Tradeweb Markets is currently generating about 0.18 per unit of volatility. If you would invest  11,755  in Tradeweb Markets on September 2, 2024 and sell it today you would earn a total of  1,795  from holding Tradeweb Markets or generate 15.27% return on investment over 90 days.

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

Fast Retailing Co  vs.  Tradeweb Markets

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.

Tradeweb Markets

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tradeweb Markets are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Tradeweb Markets showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Tradeweb Markets

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

The idea behind Fast Retailing Co and Tradeweb Markets 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.