Correlation Between NEXT Plc and Cato
Can any of the company-specific risk be diversified away by investing in both NEXT Plc and Cato 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 Cato into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEXT plc and Cato Corporation, you can compare the effects of market volatilities on NEXT Plc and Cato 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 Cato. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXT Plc and Cato.
Diversification Opportunities for NEXT Plc and Cato
Very good diversification
The 3 months correlation between NEXT and Cato is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding NEXT plc and Cato Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cato 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 Cato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cato has no effect on the direction of NEXT Plc i.e., NEXT Plc and Cato go up and down completely randomly.
Pair Corralation between NEXT Plc and Cato
Assuming the 90 days horizon NEXT plc is expected to generate 0.22 times more return on investment than Cato. However, NEXT plc is 4.59 times less risky than Cato. It trades about 0.13 of its potential returns per unit of risk. Cato Corporation is currently generating about -0.02 per unit of risk. If you would invest 11,270 in NEXT plc on September 12, 2024 and sell it today you would earn a total of 1,071 from holding NEXT plc or generate 9.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 93.75% |
| Values | Daily Returns |
NEXT plc vs. Cato Corp.
Performance |
| Timeline |
| NEXT plc |
| Cato |
NEXT Plc and Cato Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NEXT Plc and Cato
The main advantage of trading using opposite NEXT Plc and Cato positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEXT Plc position performs unexpectedly, Cato 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 Cato will offset losses from the drop in Cato's long position.| NEXT Plc vs. Reitmans Limited | NEXT Plc vs. Reitmans Limited | NEXT Plc vs. Lulus Fashion Lounge | NEXT Plc vs. Duluth Holdings |
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 CEOs Directory module to screen CEOs from public companies around the world.
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