Correlation Between Grupo Gigante and NIKE

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

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

Diversification Opportunities for Grupo Gigante and NIKE

-0.49

Correlation Coefficient

Grupo Gigante  NIKE

Very good diversification

The 3 months correlation between Grupo and NIKE is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Gigante S and NIKE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKE Inc and Grupo Gigante 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 Grupo Gigante S 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 Grupo Gigante i.e., Grupo Gigante and NIKE go up and down completely randomly.

Pair Corralation between Grupo Gigante and NIKE

Assuming the 90 days trading horizon Grupo Gigante S is expected to generate 2.16 times more return on investment than NIKE. However, Grupo Gigante is 2.16 times more volatile than NIKE Inc. It trades about 0.09 of its potential returns per unit of risk. NIKE Inc is currently generating about -0.18 per unit of risk. If you would invest  2,700  in Grupo Gigante S on September 26, 2024 and sell it today you would earn a total of  100.00  from holding Grupo Gigante S or generate 3.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Grupo Gigante S  vs.  NIKE Inc

Grupo Gigante S

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Gigante S are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Grupo Gigante may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Grupo Gigante and NIKE

The main advantage of trading using opposite Grupo Gigante and NIKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Gigante 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 Grupo Gigante S 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.