Correlation Between NIKE and European Residential

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

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

Diversification Opportunities for NIKE and European Residential

-0.09

Correlation Coefficient

NIKE  European Residential

Good diversification

The 3 months correlation between NIKE and European is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc CDR and European Residential Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Residential Real 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 CDR are associated (or correlated) with European Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Residential Real has no effect on the direction of NIKE i.e., NIKE and European Residential go up and down completely randomly.

Pair Corralation between NIKE and European Residential

Assuming the 90 days trading horizon NIKE Inc CDR is expected to under-perform the European Residential. But the stock apears to be less risky and, when comparing its historical volatility, NIKE Inc CDR is 1.55 times less risky than European Residential. The stock trades about -0.06 of its potential returns per unit of risk. The European Residential Real is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  242.00  in European Residential Real on October 7, 2024 and sell it today you would earn a total of  3.00  from holding European Residential Real or generate 1.24% return on investment over 90 days.

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

NIKE Inc CDR  vs.  European Residential Real

NIKE Inc CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIKE Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

European Residential Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days European Residential Real 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NIKE and European Residential

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

The idea behind NIKE Inc CDR and European Residential Real 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.