Correlation Between Gulf Island and Fast Retailing

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

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

Diversification Opportunities for Gulf Island and Fast Retailing

-0.17

Correlation Coefficient

Gulf Island  Fast Retailing

Good diversification

The 3 months correlation between Gulf and Fast is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Island Fabrication and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and Gulf Island 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 Gulf Island Fabrication are associated (or correlated) with Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Gulf Island i.e., Gulf Island and Fast Retailing go up and down completely randomly.

Pair Corralation between Gulf Island and Fast Retailing

Given the investment horizon of 90 days Gulf Island Fabrication is expected to generate 1.2 times more return on investment than Fast Retailing. However, Gulf Island is 1.2 times more volatile than Fast Retailing Co. It trades about 0.13 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.07 per unit of risk. If you would invest  564.00  in Gulf Island Fabrication on September 28, 2024 and sell it today you would earn a total of  145.00  from holding Gulf Island Fabrication or generate 25.71% return on investment over 90 days.

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

Gulf Island Fabrication  vs.  Fast Retailing Co

Gulf Island Fabrication

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gulf Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 fragile basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gulf Island and Fast Retailing

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

The idea behind Gulf Island Fabrication and Fast Retailing Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.