Correlation Between Superior Plus and Nike

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

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

Diversification Opportunities for Superior Plus and Nike

0.57

Correlation Coefficient

Superior Plus  Nike

Very weak diversification

The 3 months correlation between Superior and Nike is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Superior Plus 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 Superior Plus Corp are associated (or correlated) with Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Superior Plus i.e., Superior Plus and Nike go up and down completely randomly.

Pair Corralation between Superior Plus and Nike

Assuming the 90 days horizon Superior Plus is expected to generate 1.97 times less return on investment than Nike. In addition to that, Superior Plus is 1.5 times more volatile than Nike Inc. It trades about 0.06 of its total potential returns per unit of risk. Nike Inc is currently generating about 0.18 per unit of volatility. If you would invest  7,013  in Nike Inc on September 18, 2024 and sell it today you would earn a total of  420.00  from holding Nike Inc or generate 5.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Superior Plus Corp  vs.  Nike Inc

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nike Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Nike is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Superior Plus and Nike

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

The idea behind Superior Plus Corp and Nike 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .