Correlation Between NIKE and Melcor Real

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

Diversification Opportunities for NIKE and Melcor Real

0.24

Correlation Coefficient

NIKE  Melcor Real

Modest diversification

The 3 months correlation between NIKE and Melcor is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc CDR and Melcor Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melcor Real Estate 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 Melcor Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melcor Real Estate has no effect on the direction of NIKE i.e., NIKE and Melcor Real go up and down completely randomly.

Pair Corralation between NIKE and Melcor Real

Assuming the 90 days trading horizon NIKE Inc CDR is expected to under-perform the Melcor Real. In addition to that, NIKE is 3.14 times more volatile than Melcor Real Estate. It trades about -0.05 of its total potential returns per unit of risk. Melcor Real Estate is currently generating about 0.14 per unit of volatility. If you would invest  517.00  in Melcor Real Estate on December 21, 2024 and sell it today you would earn a total of  26.00  from holding Melcor Real Estate or generate 5.03% return on investment over 90 days.

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

NIKE Inc CDR  vs.  Melcor Real Estate

NIKE Inc CDR

Risk-Adjusted Performance

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 very healthy basic indicators, NIKE is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Melcor Real Estate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Melcor Real Estate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Melcor Real is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NIKE and Melcor Real

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

The idea behind NIKE Inc CDR and Melcor Real Estate 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.