Correlation Between Australian Oilseeds and Nike

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

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

Diversification Opportunities for Australian Oilseeds and Nike

0.41

Correlation Coefficient

Australian Oilseeds  Nike

Very weak diversification

The 3 months correlation between Australian and Nike is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Australian Oilseeds Holdings and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Australian Oilseeds 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 Australian Oilseeds Holdings are associated (or correlated) with Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Australian Oilseeds i.e., Australian Oilseeds and Nike go up and down completely randomly.

Pair Corralation between Australian Oilseeds and Nike

Assuming the 90 days horizon Australian Oilseeds Holdings is expected to generate 20.92 times more return on investment than Nike. However, Australian Oilseeds is 20.92 times more volatile than Nike Inc. It trades about 0.18 of its potential returns per unit of risk. Nike Inc is currently generating about -0.02 per unit of risk. If you would invest  1.25  in Australian Oilseeds Holdings on September 17, 2024 and sell it today you would earn a total of  0.63  from holding Australian Oilseeds Holdings or generate 50.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	69.23%
Values	Daily Returns

Australian Oilseeds Holdings  vs.  Nike Inc

Australian Oilseeds

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Oilseeds Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Australian Oilseeds showed solid returns over the last few months and may actually be approaching a breakup point.

Nike Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Nike is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Australian Oilseeds and Nike

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

The idea behind Australian Oilseeds Holdings and Nike Inc 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.