Correlation Between NEXT Plc and Fast Retailing

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

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

Diversification Opportunities for NEXT Plc and Fast Retailing

-0.37

Correlation Coefficient

NEXT Plc  Fast Retailing

Very good diversification

The 3 months correlation between NEXT and Fast is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding NEXT plc and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of NEXT Plc i.e., NEXT Plc and Fast Retailing go up and down completely randomly.

Pair Corralation between NEXT Plc and Fast Retailing

Assuming the 90 days horizon NEXT plc is expected to generate 0.85 times more return on investment than Fast Retailing. However, NEXT plc is 1.17 times less risky than Fast Retailing. It trades about 0.12 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.02 per unit of risk. If you would invest  14,527  in NEXT plc on May 22, 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

NEXT plc  vs.  Fast Retailing Co

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.

Fast Retailing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NEXT Plc and Fast Retailing

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

The idea behind NEXT plc and Fast Retailing Co 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.