Correlation Between IGM Financial and NIKE

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

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

Diversification Opportunities for IGM Financial and NIKE

0.18

Correlation Coefficient

IGM Financial  NIKE

Average diversification

The 3 months correlation between IGM and NIKE is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding IGM Financial and NIKE Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKE Inc CDR and IGM Financial 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 IGM Financial 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 CDR has no effect on the direction of IGM Financial i.e., IGM Financial and NIKE go up and down completely randomly.

Pair Corralation between IGM Financial and NIKE

Assuming the 90 days trading horizon IGM Financial is expected to generate 0.66 times more return on investment than NIKE. However, IGM Financial is 1.52 times less risky than NIKE. It trades about -0.01 of its potential returns per unit of risk. NIKE Inc CDR is currently generating about -0.09 per unit of risk. If you would invest  4,569  in IGM Financial on December 28, 2024 and sell it today you would lose (44.00) from holding IGM Financial or give up 0.96% of portfolio value over 90 days.

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

IGM Financial  vs.  NIKE Inc CDR

IGM Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days IGM Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, IGM Financial is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

NIKE Inc CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NIKE Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with IGM Financial and NIKE

The main advantage of trading using opposite IGM Financial and NIKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IGM Financial 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 IGM Financial and NIKE Inc CDR 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.