Correlation Between Nike and WeRide American

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

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

Diversification Opportunities for Nike and WeRide American

-0.02

Correlation Coefficient

Nike  WeRide American

Good diversification

The 3 months correlation between Nike and WeRide is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and WeRide American Depositary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WeRide American Depo 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 WeRide American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WeRide American Depo has no effect on the direction of Nike i.e., Nike and WeRide American go up and down completely randomly.

Pair Corralation between Nike and WeRide American

Considering the 90-day investment horizon Nike is expected to generate 10.76 times less return on investment than WeRide American. But when comparing it to its historical volatility, Nike Inc is 8.07 times less risky than WeRide American. It trades about 0.07 of its potential returns per unit of risk. WeRide American Depositary is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,546  in WeRide American Depositary on September 5, 2024 and sell it today you would earn a total of  148.00  from holding WeRide American Depositary or generate 9.57% 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.  WeRide American Depositary

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.

WeRide American Depo

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WeRide American Depositary are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, WeRide American exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nike and WeRide American

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

The idea behind Nike Inc and WeRide American Depositary 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.