Correlation Between NIKE and NVIDIACDR

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

Diversification Opportunities for NIKE and NVIDIACDR

0.01

Correlation Coefficient

NIKE  NVIDIACDR

Significant diversification

The 3 months correlation between NIKE and NVIDIACDR is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc CDR and NVIDIA CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA CDR 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 NVIDIACDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA CDR has no effect on the direction of NIKE i.e., NIKE and NVIDIACDR go up and down completely randomly.

Pair Corralation between NIKE and NVIDIACDR

Assuming the 90 days trading horizon NIKE Inc CDR is expected to generate 0.47 times more return on investment than NVIDIACDR. However, NIKE Inc CDR is 2.12 times less risky than NVIDIACDR. It trades about 0.01 of its potential returns per unit of risk. NVIDIA CDR is currently generating about -0.03 per unit of risk. If you would invest  1,472  in NIKE Inc CDR on December 1, 2024 and sell it today you would lose (4.00) from holding NIKE Inc CDR or give up 0.27% of portfolio value over 90 days.

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

NIKE Inc CDR  vs.  NVIDIA CDR

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 latest stock price disarray, may contribute to short-term losses for the investors.

NVIDIA CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with NIKE and NVIDIACDR

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

The idea behind NIKE Inc CDR and NVIDIA CDR 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.