Correlation Between Nikon Corp and YETI Holdings

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

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

Diversification Opportunities for Nikon Corp and YETI Holdings

-0.18

Correlation Coefficient

Nikon Corp  YETI Holdings

Good diversification

The 3 months correlation between Nikon and YETI is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nikon Corp and YETI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YETI Holdings and Nikon Corp 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 Nikon Corp are associated (or correlated) with YETI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YETI Holdings has no effect on the direction of Nikon Corp i.e., Nikon Corp and YETI Holdings go up and down completely randomly.

Pair Corralation between Nikon Corp and YETI Holdings

Assuming the 90 days horizon Nikon Corp is expected to generate 0.97 times more return on investment than YETI Holdings. However, Nikon Corp is 1.04 times less risky than YETI Holdings. It trades about 0.03 of its potential returns per unit of risk. YETI Holdings is currently generating about -0.01 per unit of risk. If you would invest  961.00  in Nikon Corp on September 13, 2024 and sell it today you would earn a total of  122.00  from holding Nikon Corp or generate 12.7% return on investment over 90 days.

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

Nikon Corp  vs.  YETI Holdings

Nikon Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nikon Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Nikon Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

YETI Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YETI Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, YETI Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nikon Corp and YETI Holdings

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

The idea behind Nikon Corp and YETI Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.