Correlation Between Fast Retailing and Shoe Carnival

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

Diversification Opportunities for Fast Retailing and Shoe Carnival

-0.12

Correlation Coefficient

Fast Retailing  Shoe Carnival

Good diversification

The 3 months correlation between Fast and Shoe is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Shoe Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoe Carnival 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 Shoe Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoe Carnival has no effect on the direction of Fast Retailing i.e., Fast Retailing and Shoe Carnival go up and down completely randomly.

Pair Corralation between Fast Retailing and Shoe Carnival

Assuming the 90 days horizon Fast Retailing Co is expected to under-perform the Shoe Carnival. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 1.48 times less risky than Shoe Carnival. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Shoe Carnival is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,743  in Shoe Carnival on April 23, 2025 and sell it today you would earn a total of  445.00  from holding Shoe Carnival or generate 25.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Fast Retailing Co  vs.  Shoe Carnival

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. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Shoe Carnival

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shoe Carnival are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Shoe Carnival disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and Shoe Carnival

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

The idea behind Fast Retailing Co and Shoe Carnival 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.