Correlation Between Tillys and NEXT Plc

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

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

Diversification Opportunities for Tillys and NEXT Plc

-0.47

Correlation Coefficient

Tillys  NEXT Plc

Very good diversification

The 3 months correlation between Tillys and NEXT is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tillys Inc and NEXT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXT plc and Tillys 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 Tillys Inc 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 Tillys i.e., Tillys and NEXT Plc go up and down completely randomly.

Pair Corralation between Tillys and NEXT Plc

Given the investment horizon of 90 days Tillys Inc is expected to under-perform the NEXT Plc. In addition to that, Tillys is 1.39 times more volatile than NEXT plc. It trades about -0.06 of its total potential returns per unit of risk. NEXT plc is currently generating about 0.07 per unit of volatility. 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	Very Weak
Accuracy	99.63%
Values	Daily Returns

Tillys Inc  vs.  NEXT plc

Tillys Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tillys Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Tillys and NEXT Plc

The main advantage of trading using opposite Tillys and NEXT Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tillys 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 Tillys Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.