Correlation Between NEXT Plc and Tillys

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

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

Diversification Opportunities for NEXT Plc and Tillys

0.04

Correlation Coefficient

NEXT Plc  Tillys

Significant diversification

The 3 months correlation between NEXT and Tillys is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding NEXT plc and Tillys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tillys Inc 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 Tillys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tillys Inc has no effect on the direction of NEXT Plc i.e., NEXT Plc and Tillys go up and down completely randomly.

Pair Corralation between NEXT Plc and Tillys

Assuming the 90 days horizon NEXT plc is expected to generate 0.28 times more return on investment than Tillys. However, NEXT plc is 3.57 times less risky than Tillys. It trades about 0.22 of its potential returns per unit of risk. Tillys Inc is currently generating about -0.16 per unit of risk. If you would invest  12,150  in NEXT plc on December 11, 2024 and sell it today you would earn a total of  505.00  from holding NEXT plc or generate 4.16% return on investment over 90 days.

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

NEXT plc  vs.  Tillys Inc

NEXT plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NEXT plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NEXT Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Tillys Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tillys Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Tillys may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NEXT Plc and Tillys

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

The idea behind NEXT plc and Tillys Inc 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.