Correlation Between Fast Retailing and NEXT Plc

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

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

Diversification Opportunities for Fast Retailing and NEXT Plc

-0.28

Correlation Coefficient

Fast Retailing  NEXT Plc

Very good diversification

The 3 months correlation between Fast and NEXT is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and NEXT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXT plc and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and NEXT Plc go up and down completely randomly.

Pair Corralation between Fast Retailing and NEXT Plc

Assuming the 90 days horizon Fast Retailing is expected to generate 2.13 times less return on investment than NEXT Plc. In addition to that, Fast Retailing is 1.2 times more volatile than NEXT plc. It trades about 0.05 of its total potential returns per unit of risk. NEXT plc is currently generating about 0.12 per unit of volatility. If you would invest  14,527  in NEXT plc on May 27, 2025 and sell it today you would earn a total of  2,153  from holding NEXT plc or generate 14.82% return on investment over 90 days.

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

Fast Retailing Co  vs.  NEXT plc

Fast Retailing

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fast Retailing may actually be approaching a critical reversion point that can send shares even higher in September 2025.

NEXT plc

Risk-Adjusted Performance

Fair

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 weak basic indicators, NEXT Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fast Retailing and NEXT Plc

The main advantage of trading using opposite Fast Retailing and NEXT Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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 Fast Retailing Co 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.