Correlation Between NIKE and Transportadora

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

By analyzing existing cross correlation between NIKE Inc and Transportadora de Gas, you can compare the effects of market volatilities on NIKE and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIKE and Transportadora.

Diversification Opportunities for NIKE and Transportadora

-0.78

Correlation Coefficient

NIKE  Transportadora

Pay attention - limited upside

The 3 months correlation between NIKE and Transportadora is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of NIKE i.e., NIKE and Transportadora go up and down completely randomly.

Pair Corralation between NIKE and Transportadora

Assuming the 90 days trading horizon NIKE Inc is expected to under-perform the Transportadora. But the stock apears to be less risky and, when comparing its historical volatility, NIKE Inc is 1.14 times less risky than Transportadora. The stock trades about -0.13 of its potential returns per unit of risk. The Transportadora de Gas is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  528,000  in Transportadora de Gas on September 4, 2024 and sell it today you would earn a total of  116,000  from holding Transportadora de Gas or generate 21.97% return on investment over 90 days.

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

NIKE Inc  vs.  Transportadora de Gas

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. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Transportadora de Gas

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Transportadora sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NIKE and Transportadora

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

The idea behind NIKE Inc and Transportadora de Gas 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.