Correlation Between NIKE and Legend Power

Can any of the company-specific risk be diversified away by investing in both NIKE and Legend Power 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 Legend Power 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 Legend Power Systems, you can compare the effects of market volatilities on NIKE and Legend Power 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 Legend Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIKE and Legend Power.

Diversification Opportunities for NIKE and Legend Power

0.48

Correlation Coefficient

NIKE  Legend Power

Very weak diversification

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

Pair Corralation between NIKE and Legend Power

Assuming the 90 days trading horizon NIKE Inc CDR is expected to under-perform the Legend Power. But the stock apears to be less risky and, when comparing its historical volatility, NIKE Inc CDR is 3.31 times less risky than Legend Power. The stock trades about -0.04 of its potential returns per unit of risk. The Legend Power Systems is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Legend Power Systems on October 24, 2024 and sell it today you would earn a total of  6.00  from holding Legend Power Systems or generate 35.29% return on investment over 90 days.

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

NIKE Inc CDR  vs.  Legend Power Systems

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.

Legend Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Legend Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with NIKE and Legend Power

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

The idea behind NIKE Inc CDR and Legend Power Systems 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.