Correlation Between Top Wealth and NEXT Plc

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

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

Diversification Opportunities for Top Wealth and NEXT Plc

-0.32

Correlation Coefficient

Top Wealth  NEXT Plc

Very good diversification

The 3 months correlation between Top and NEXT is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Top Wealth Group and NEXT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXT plc and Top Wealth 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 Top Wealth Group 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 Top Wealth i.e., Top Wealth and NEXT Plc go up and down completely randomly.

Pair Corralation between Top Wealth and NEXT Plc

Considering the 90-day investment horizon Top Wealth Group is expected to generate 29.54 times more return on investment than NEXT Plc. However, Top Wealth is 29.54 times more volatile than NEXT plc. It trades about 0.09 of its potential returns per unit of risk. NEXT plc is currently generating about 0.07 per unit of risk. If you would invest  0.00  in Top Wealth Group on September 25, 2024 and sell it today you would earn a total of  20.00  from holding Top Wealth Group or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	71.26%
Values	Daily Returns

Top Wealth Group  vs.  NEXT plc

Top Wealth Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Top Wealth Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Top Wealth reported solid returns over the last few months and may actually be approaching a breakup point.

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 Top Wealth and NEXT Plc

The main advantage of trading using opposite Top Wealth and NEXT Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Wealth 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 Top Wealth Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.