Correlation Between Nike and PUMA SE

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

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

Diversification Opportunities for Nike and PUMA SE

-0.48

Correlation Coefficient

Nike  PUMA SE

Very good diversification

The 3 months correlation between Nike and PUMA is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and PUMA SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUMA SE 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 PUMA SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUMA SE has no effect on the direction of Nike i.e., Nike and PUMA SE go up and down completely randomly.

Pair Corralation between Nike and PUMA SE

Assuming the 90 days horizon Nike Inc is expected to generate 0.81 times more return on investment than PUMA SE. However, Nike Inc is 1.23 times less risky than PUMA SE. It trades about 0.14 of its potential returns per unit of risk. PUMA SE is currently generating about -0.04 per unit of risk. If you would invest  7,015  in Nike Inc on September 17, 2024 and sell it today you would earn a total of  351.00  from holding Nike Inc or generate 5.0% return on investment over 90 days.

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

Nike Inc  vs.  PUMA SE

Nike Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nike is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PUMA SE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PUMA SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PUMA SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nike and PUMA SE

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

The idea behind Nike Inc and PUMA SE 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.