Correlation Between NEXT Plc and Reitmans

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

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

Diversification Opportunities for NEXT Plc and Reitmans

-0.62

Correlation Coefficient

NEXT Plc  Reitmans

Excellent diversification

The 3 months correlation between NEXT and Reitmans is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding NEXT plc and Reitmans Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reitmans Limited 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 Reitmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reitmans Limited has no effect on the direction of NEXT Plc i.e., NEXT Plc and Reitmans go up and down completely randomly.

Pair Corralation between NEXT Plc and Reitmans

Assuming the 90 days horizon NEXT plc is expected to generate 1.43 times more return on investment than Reitmans. However, NEXT Plc is 1.43 times more volatile than Reitmans Limited. It trades about 0.07 of its potential returns per unit of risk. Reitmans Limited is currently generating about -0.02 per unit of risk. If you would invest  8,392  in NEXT plc on September 28, 2024 and sell it today you would earn a total of  3,949  from holding NEXT plc or generate 47.06% return on investment over 90 days.

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

NEXT plc  vs.  Reitmans Limited

NEXT plc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEXT plc are ranked lower than 10 (%) 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.

Reitmans Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reitmans Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NEXT Plc and Reitmans

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

The idea behind NEXT plc and Reitmans Limited 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.