Correlation Between NIKE and Telecom Argentina

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

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

Diversification Opportunities for NIKE and Telecom Argentina

-0.31

Correlation Coefficient

NIKE  Telecom Argentina

Very good diversification

The 3 months correlation between NIKE and Telecom is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc and Telecom Argentina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Argentina and NIKE 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 NIKE Inc are associated (or correlated) with Telecom Argentina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Argentina has no effect on the direction of NIKE i.e., NIKE and Telecom Argentina go up and down completely randomly.

Pair Corralation between NIKE and Telecom Argentina

Assuming the 90 days trading horizon NIKE Inc is expected to generate 0.63 times more return on investment than Telecom Argentina. However, NIKE Inc is 1.59 times less risky than Telecom Argentina. It trades about -0.05 of its potential returns per unit of risk. Telecom Argentina is currently generating about -0.04 per unit of risk. If you would invest  743,000  in NIKE Inc on December 30, 2024 and sell it today you would lose (51,000) from holding NIKE Inc or give up 6.86% of portfolio value over 90 days.

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

NIKE Inc  vs.  Telecom Argentina

NIKE Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NIKE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, NIKE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Telecom Argentina

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telecom Argentina has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers 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 NIKE and Telecom Argentina

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

The idea behind NIKE Inc and Telecom Argentina 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.