Correlation Between Fast Retailing and Vulcan Materials

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

Diversification Opportunities for Fast Retailing and Vulcan Materials

0.34

Correlation Coefficient

Fast Retailing  Vulcan Materials

Weak diversification

The 3 months correlation between Fast and Vulcan is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Fast Retailing i.e., Fast Retailing and Vulcan Materials go up and down completely randomly.

Pair Corralation between Fast Retailing and Vulcan Materials

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the Vulcan Materials. In addition to that, Fast Retailing is 1.07 times more volatile than Vulcan Materials. It trades about -0.08 of its total potential returns per unit of risk. Vulcan Materials is currently generating about 0.06 per unit of volatility. If you would invest  21,361  in Vulcan Materials on April 23, 2025 and sell it today you would earn a total of  1,239  from holding Vulcan Materials or generate 5.8% return on investment over 90 days.

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

Fast Retailing Co  vs.  Vulcan Materials

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 uncertain 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.

Vulcan Materials

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Fast Retailing and Vulcan Materials

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

The idea behind Fast Retailing Co and Vulcan Materials 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.