Correlation Between Nike and Virgin Group

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

By analyzing existing cross correlation between Nike Inc and Virgin Group Acquisition, you can compare the effects of market volatilities on Nike and Virgin Group 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 Virgin Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Virgin Group.

Diversification Opportunities for Nike and Virgin Group

-0.13

Correlation Coefficient

Nike  Virgin Group

Good diversification

The 3 months correlation between Nike and Virgin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Virgin Group Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Group Acquisition 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 Virgin Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Group Acquisition has no effect on the direction of Nike i.e., Nike and Virgin Group go up and down completely randomly.

Pair Corralation between Nike and Virgin Group

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Virgin Group. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 2.18 times less risky than Virgin Group. The stock trades about -0.01 of its potential returns per unit of risk. The Virgin Group Acquisition is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  139.00  in Virgin Group Acquisition on September 12, 2024 and sell it today you would earn a total of  9.00  from holding Virgin Group Acquisition or generate 6.47% return on investment over 90 days.

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

Nike Inc  vs.  Virgin Group Acquisition

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Virgin Group Acquisition

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virgin Group Acquisition are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Virgin Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nike and Virgin Group

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

The idea behind Nike Inc and Virgin Group Acquisition 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..