Correlation Between Fast Retailing and Otello ASA

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

Diversification Opportunities for Fast Retailing and Otello ASA

-0.68

Correlation Coefficient

Fast Retailing  Otello ASA

Excellent diversification

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

Pair Corralation between Fast Retailing and Otello ASA

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the Otello ASA. But the stock apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 1.11 times less risky than Otello ASA. The stock trades about -0.09 of its potential returns per unit of risk. The Otello ASA is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  75.00  in Otello ASA on April 24, 2025 and sell it today you would earn a total of  37.00  from holding Otello ASA or generate 49.33% return on investment over 90 days.

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

Fast Retailing Co  vs.  Otello ASA

Fast Retailing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Otello ASA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Otello ASA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Otello ASA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Otello ASA

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

The idea behind Fast Retailing Co and Otello ASA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.