Correlation Between Gap, and Nike

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

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

Diversification Opportunities for Gap, and Nike

-0.29

Correlation Coefficient

Gap,  Nike

Very good diversification

The 3 months correlation between Gap, and Nike is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Nike go up and down completely randomly.

Pair Corralation between Gap, and Nike

Considering the 90-day investment horizon The Gap, is expected to generate 1.18 times more return on investment than Nike. However, Gap, is 1.18 times more volatile than Nike Inc. It trades about 0.0 of its potential returns per unit of risk. Nike Inc is currently generating about -0.05 per unit of risk. If you would invest  2,565  in The Gap, on September 14, 2024 and sell it today you would lose (136.00) from holding The Gap, or give up 5.3% of portfolio value over 90 days.

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

The Gap,  vs.  Nike Inc

Gap,

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, reported 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Gap, and Nike

The main advantage of trading using opposite Gap, and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.