Correlation Between Next PLC and Hardide PLC
Can any of the company-specific risk be diversified away by investing in both Next PLC and Hardide PLC 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 Hardide PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Next PLC and Hardide PLC, you can compare the effects of market volatilities on Next PLC and Hardide PLC 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 Hardide PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Next PLC and Hardide PLC.
Diversification Opportunities for Next PLC and Hardide PLC
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Next and Hardide is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Next PLC and Hardide PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hardide PLC 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 Hardide PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hardide PLC has no effect on the direction of Next PLC i.e., Next PLC and Hardide PLC go up and down completely randomly.
Pair Corralation between Next PLC and Hardide PLC
Assuming the 90 days trading horizon Next PLC is expected to generate 0.49 times more return on investment than Hardide PLC. However, Next PLC is 2.03 times less risky than Hardide PLC. It trades about 0.09 of its potential returns per unit of risk. Hardide PLC is currently generating about -0.06 per unit of risk. If you would invest 555,940 in Next PLC on August 29, 2024 and sell it today you would earn a total of 423,660 from holding Next PLC or generate 76.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Next PLC vs. Hardide PLC
Performance |
| Timeline |
| Next PLC |
| Hardide PLC |
Next PLC and Hardide PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Next PLC and Hardide PLC
The main advantage of trading using opposite Next PLC and Hardide PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Next PLC position performs unexpectedly, Hardide PLC 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 Hardide PLC will offset losses from the drop in Hardide PLC's long position.| Next PLC vs. Tungsten West PLC | Next PLC vs. Argo Group Limited | Next PLC vs. Hardide PLC | Next PLC vs. Versarien PLC |
| Hardide PLC vs. Givaudan SA | Hardide PLC vs. Antofagasta PLC | Hardide PLC vs. Centamin PLC | Hardide PLC vs. Atalaya Mining |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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