Correlation Between NEXT Plc and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both NEXT Plc 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 NEXT Plc and Fast Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEXT plc and Fast Retailing Co, you can compare the effects of market volatilities on NEXT Plc 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 NEXT Plc with a short position of Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXT Plc and Fast Retailing.
Diversification Opportunities for NEXT Plc and Fast Retailing
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NEXT and Fast is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding NEXT plc and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing and NEXT Plc 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 NEXT plc 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 NEXT Plc i.e., NEXT Plc and Fast Retailing go up and down completely randomly.
Pair Corralation between NEXT Plc and Fast Retailing
Assuming the 90 days horizon NEXT plc is expected to under-perform the Fast Retailing. But the stock apears to be less risky and, when comparing its historical volatility, NEXT plc is 1.2 times less risky than Fast Retailing. The stock trades about -0.2 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 31,740 in Fast Retailing Co on October 20, 2024 and sell it today you would lose (1,620) from holding Fast Retailing Co or give up 5.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NEXT plc vs. Fast Retailing Co
Performance |
| Timeline |
| NEXT plc |
| Fast Retailing |
NEXT Plc and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXT Plc and Fast Retailing
The main advantage of trading using opposite NEXT Plc and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXT Plc 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.| NEXT Plc vs. Industria de Diseno | NEXT Plc vs. The TJX Companies | NEXT Plc vs. Fast Retailing Co | NEXT Plc vs. Lululemon Athletica |
| Fast Retailing vs. Industria de Diseno | Fast Retailing vs. The TJX Companies | Fast Retailing vs. Lululemon Athletica | Fast Retailing vs. NEXT plc |
Check out your portfolio center.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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