Correlation Between NEXT Plc and Aritzia

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

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

Diversification Opportunities for NEXT Plc and Aritzia

0.36

Correlation Coefficient

NEXT Plc  Aritzia

Weak diversification

The 3 months correlation between NEXT and Aritzia is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NEXT plc and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia 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 Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of NEXT Plc i.e., NEXT Plc and Aritzia go up and down completely randomly.

Pair Corralation between NEXT Plc and Aritzia

Assuming the 90 days horizon NEXT Plc is expected to generate 1.26 times less return on investment than Aritzia. In addition to that, NEXT Plc is 1.02 times more volatile than Aritzia. It trades about 0.22 of its total potential returns per unit of risk. Aritzia is currently generating about 0.29 per unit of volatility. If you would invest  3,282  in Aritzia on September 25, 2024 and sell it today you would earn a total of  424.00  from holding Aritzia or generate 12.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

NEXT plc  vs.  Aritzia

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.

Aritzia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aritzia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Aritzia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NEXT Plc and Aritzia

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

The idea behind NEXT plc and Aritzia 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.