Correlation Between Nike and EON Resources

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

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

Diversification Opportunities for Nike and EON Resources

0.25

Correlation Coefficient

Nike  EON Resources

Modest diversification

The 3 months correlation between Nike and EON is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and EON Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EON Resources and Nike 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 Nike Inc are associated (or correlated) with EON Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EON Resources has no effect on the direction of Nike i.e., Nike and EON Resources go up and down completely randomly.

Pair Corralation between Nike and EON Resources

Considering the 90-day investment horizon Nike Inc is expected to generate 0.18 times more return on investment than EON Resources. However, Nike Inc is 5.53 times less risky than EON Resources. It trades about -0.02 of its potential returns per unit of risk. EON Resources is currently generating about -0.01 per unit of risk. If you would invest  11,008  in Nike Inc on September 3, 2024 and sell it today you would lose (3,131) from holding Nike Inc or give up 28.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nike Inc  vs.  EON Resources

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.

EON Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EON Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, EON Resources is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nike and EON Resources

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

The idea behind Nike Inc and EON Resources 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 Global Correlations module to find global opportunities by holding instruments from different markets.