Correlation Between NIKE and Hoteles City

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

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

Diversification Opportunities for NIKE and Hoteles City

0.07

Correlation Coefficient

NIKE  Hoteles City

Significant diversification

The 3 months correlation between NIKE and Hoteles is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc and Hoteles City Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoteles City Express 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 Hoteles City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoteles City Express has no effect on the direction of NIKE i.e., NIKE and Hoteles City go up and down completely randomly.

Pair Corralation between NIKE and Hoteles City

Assuming the 90 days trading horizon NIKE Inc is expected to generate 0.97 times more return on investment than Hoteles City. However, NIKE Inc is 1.03 times less risky than Hoteles City. It trades about -0.02 of its potential returns per unit of risk. Hoteles City Express is currently generating about -0.05 per unit of risk. If you would invest  216,935  in NIKE Inc on September 18, 2024 and sell it today you would lose (60,896) from holding NIKE Inc or give up 28.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

NIKE Inc  vs.  Hoteles City Express

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. In spite of fairly strong technical and fundamental indicators, NIKE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Hoteles City Express

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hoteles City Express are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Hoteles City is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NIKE and Hoteles City

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

The idea behind NIKE Inc and Hoteles City Express 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.