Correlation Between FARO Technologies and Fast Retailing

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

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

Diversification Opportunities for FARO Technologies and Fast Retailing

-0.39

Correlation Coefficient

FARO Technologies  Fast Retailing

Very good diversification

The 3 months correlation between FARO and Fast is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and FARO Technologies 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 FARO Technologies 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 FARO Technologies i.e., FARO Technologies and Fast Retailing go up and down completely randomly.

Pair Corralation between FARO Technologies and Fast Retailing

Assuming the 90 days horizon FARO Technologies is expected to generate 2.38 times more return on investment than Fast Retailing. However, FARO Technologies is 2.38 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  2,760  in FARO Technologies on May 5, 2025 and sell it today you would earn a total of  980.00  from holding FARO Technologies or generate 35.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.88%
Values	Daily Returns

FARO Technologies  vs.  Fast Retailing Co

FARO Technologies

Risk-Adjusted Performance

OK

Over the last 90 days FARO Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, FARO Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with FARO Technologies and Fast Retailing

The main advantage of trading using opposite FARO Technologies and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies 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 FARO Technologies 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.