Correlation Between Duluth Holdings and Next PLC

Can any of the company-specific risk be diversified away by investing in both Duluth Holdings and Next 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 Duluth Holdings and Next PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Duluth Holdings and Next PLC ADR, you can compare the effects of market volatilities on Duluth Holdings and Next 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 Duluth Holdings with a short position of Next PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duluth Holdings and Next PLC.

Diversification Opportunities for Duluth Holdings and Next PLC

0.03

Correlation Coefficient

Duluth Holdings  Next PLC

Significant diversification

The 3 months correlation between Duluth and Next is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Duluth Holdings and Next PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next PLC ADR and Duluth Holdings 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 Duluth Holdings are associated (or correlated) with Next PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next PLC ADR has no effect on the direction of Duluth Holdings i.e., Duluth Holdings and Next PLC go up and down completely randomly.

Pair Corralation between Duluth Holdings and Next PLC

Given the investment horizon of 90 days Duluth Holdings is expected to under-perform the Next PLC. In addition to that, Duluth Holdings is 2.43 times more volatile than Next PLC ADR. It trades about -0.23 of its total potential returns per unit of risk. Next PLC ADR is currently generating about 0.24 per unit of volatility. If you would invest  6,163  in Next PLC ADR on October 11, 2024 and sell it today you would earn a total of  327.00  from holding Next PLC ADR or generate 5.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Duluth Holdings  vs.  Next PLC ADR

Duluth Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duluth Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Next PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Next PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Next PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Duluth Holdings and Next PLC

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

The idea behind Duluth Holdings and Next PLC ADR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..