Correlation Between Nike and 00206RFW7

Can any of the company-specific risk be diversified away by investing in both Nike and 00206RFW7 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 00206RFW7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nike Inc and ATT INC 49, you can compare the effects of market volatilities on Nike and 00206RFW7 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 00206RFW7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and 00206RFW7.

Diversification Opportunities for Nike and 00206RFW7

0.44

Correlation Coefficient

Nike  00206RFW7

Very weak diversification

The 3 months correlation between Nike and 00206RFW7 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and ATT INC 49 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT INC 49 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 00206RFW7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT INC 49 has no effect on the direction of Nike i.e., Nike and 00206RFW7 go up and down completely randomly.

Pair Corralation between Nike and 00206RFW7

Considering the 90-day investment horizon Nike Inc is expected to under-perform the 00206RFW7. In addition to that, Nike is 1.72 times more volatile than ATT INC 49. It trades about -0.02 of its total potential returns per unit of risk. ATT INC 49 is currently generating about -0.02 per unit of volatility. If you would invest  9,864  in ATT INC 49 on September 3, 2024 and sell it today you would lose (178.00) from holding ATT INC 49 or give up 1.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Nike Inc  vs.  ATT INC 49

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.

ATT INC 49

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATT INC 49 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 00206RFW7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nike and 00206RFW7

The main advantage of trading using opposite Nike and 00206RFW7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, 00206RFW7 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 00206RFW7 will offset losses from the drop in 00206RFW7's long position.

The idea behind Nike Inc and ATT INC 49 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.