Correlation Between Maple Leaf and NIKE

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

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

Diversification Opportunities for Maple Leaf and NIKE

0.21

Correlation Coefficient

Maple Leaf  NIKE

Modest diversification

The 3 months correlation between Maple and NIKE is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Maple Leaf Foods 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 Maple Leaf 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 Maple Leaf Foods 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 Maple Leaf i.e., Maple Leaf and NIKE go up and down completely randomly.

Pair Corralation between Maple Leaf and NIKE

Assuming the 90 days trading horizon Maple Leaf Foods is expected to under-perform the NIKE. In addition to that, Maple Leaf is 1.38 times more volatile than NIKE Inc CDR. It trades about -0.11 of its total potential returns per unit of risk. NIKE Inc CDR is currently generating about -0.04 per unit of volatility. If you would invest  1,398  in NIKE Inc CDR on October 7, 2024 and sell it today you would lose (36.00) from holding NIKE Inc CDR or give up 2.58% of portfolio value over 90 days.

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

Maple Leaf Foods  vs.  NIKE Inc CDR

Maple Leaf Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maple Leaf Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Maple Leaf 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

0 of 100

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 abnormal 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 Maple Leaf and NIKE

The main advantage of trading using opposite Maple Leaf and NIKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Maple Leaf 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 Maple Leaf Foods 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.