Correlation Between Nike and 833034AL5

Can any of the company-specific risk be diversified away by investing in both Nike and 833034AL5 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 833034AL5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nike Inc and SNAP ON INC, you can compare the effects of market volatilities on Nike and 833034AL5 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 833034AL5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and 833034AL5.

Diversification Opportunities for Nike and 833034AL5

0.41

Correlation Coefficient

Nike  833034AL5

Very weak diversification

The 3 months correlation between Nike and 833034AL5 is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and SNAP ON INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNAP ON INC 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 833034AL5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNAP ON INC has no effect on the direction of Nike i.e., Nike and 833034AL5 go up and down completely randomly.

Pair Corralation between Nike and 833034AL5

Considering the 90-day investment horizon Nike Inc is expected to generate 1.39 times more return on investment than 833034AL5. However, Nike is 1.39 times more volatile than SNAP ON INC. It trades about 0.01 of its potential returns per unit of risk. SNAP ON INC is currently generating about -0.17 per unit of risk. If you would invest  7,861  in Nike Inc on September 13, 2024 and sell it today you would earn a total of  24.00  from holding Nike Inc or generate 0.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	58.73%
Values	Daily Returns

Nike Inc  vs.  SNAP ON INC

Nike Inc

Risk-Adjusted Performance

0 of 100

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.

SNAP ON INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNAP ON INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for SNAP ON INC investors.

Pair Trading with Nike and 833034AL5

The main advantage of trading using opposite Nike and 833034AL5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, 833034AL5 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 833034AL5 will offset losses from the drop in 833034AL5's long position.

The idea behind Nike Inc and SNAP ON 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.