Correlation Between Zumiez and NEXT Plc

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

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

Diversification Opportunities for Zumiez and NEXT Plc

-0.44

Correlation Coefficient

Zumiez  NEXT Plc

Very good diversification

The 3 months correlation between Zumiez and NEXT is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Zumiez Inc and NEXT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXT plc and Zumiez 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 Zumiez 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 Zumiez i.e., Zumiez and NEXT Plc go up and down completely randomly.

Pair Corralation between Zumiez and NEXT Plc

Given the investment horizon of 90 days Zumiez is expected to generate 4.85 times less return on investment than NEXT Plc. In addition to that, Zumiez is 1.14 times more volatile than NEXT plc. It trades about 0.01 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	100.0%
Values	Daily Returns

Zumiez Inc  vs.  NEXT plc

Zumiez Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zumiez Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Zumiez is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the 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 Zumiez and NEXT Plc

The main advantage of trading using opposite Zumiez and NEXT Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zumiez 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 Zumiez 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.