Correlation Between Industria and NEXT Plc

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

By analyzing existing cross correlation between Industria de Diseo and NEXT plc, you can compare the effects of market volatilities on Industria 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 Industria with a short position of NEXT Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industria and NEXT Plc.

Diversification Opportunities for Industria and NEXT Plc

-0.33

Correlation Coefficient

Industria  NEXT Plc

Very good diversification

The 3 months correlation between Industria and NEXT is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseo and NEXT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXT plc and Industria 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 Industria de Diseo 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 has no effect on the direction of Industria i.e., Industria and NEXT Plc go up and down completely randomly.

Pair Corralation between Industria and NEXT Plc

Assuming the 90 days horizon Industria de Diseo is expected to under-perform the NEXT Plc. In addition to that, Industria is 2.17 times more volatile than NEXT plc. It trades about -0.03 of its total potential returns per unit of risk. NEXT plc is currently generating about 0.13 per unit of volatility. If you would invest  11,270  in NEXT plc on September 25, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Industria de Diseo  vs.  NEXT plc

Industria de Diseo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industria de Diseo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Industria is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NEXT plc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEXT plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NEXT Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Industria and NEXT Plc

The main advantage of trading using opposite Industria and NEXT Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industria 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 Industria de Diseo and NEXT plc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.