Correlation Between Eastern and Nike

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

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

Diversification Opportunities for Eastern and Nike

0.77

Correlation Coefficient

Eastern  Nike

Poor diversification

The 3 months correlation between Eastern and Nike is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Eastern 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 Eastern Co 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 Eastern i.e., Eastern and Nike go up and down completely randomly.

Pair Corralation between Eastern and Nike

Considering the 90-day investment horizon Eastern Co is expected to under-perform the Nike. In addition to that, Eastern is 1.93 times more volatile than Nike Inc. It trades about -0.17 of its total potential returns per unit of risk. Nike Inc is currently generating about -0.27 per unit of volatility. If you would invest  7,858  in Nike Inc on October 6, 2024 and sell it today you would lose (527.00) from holding Nike Inc or give up 6.71% of portfolio value over 90 days.

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

Eastern Co  vs.  Nike Inc

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 latest conflicting performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Eastern and Nike

The main advantage of trading using opposite Eastern and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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 Eastern Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.