Correlation Between Nike and CARSALESCOM

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

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

Diversification Opportunities for Nike and CARSALESCOM

-0.2

Correlation Coefficient

Nike  CARSALESCOM

Good diversification

The 3 months correlation between Nike and CARSALESCOM is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Nike i.e., Nike and CARSALESCOM go up and down completely randomly.

Pair Corralation between Nike and CARSALESCOM

Assuming the 90 days horizon Nike Inc is expected to generate 0.79 times more return on investment than CARSALESCOM. However, Nike Inc is 1.26 times less risky than CARSALESCOM. It trades about -0.25 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.23 per unit of risk. If you would invest  7,386  in Nike Inc on October 10, 2024 and sell it today you would lose (407.00) from holding Nike Inc or give up 5.51% 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.  CARSALESCOM

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 latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nike and CARSALESCOM

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

The idea behind Nike Inc and CARSALESCOM 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.