Correlation Between Nike and BROADWIND ENRGY

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

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

Diversification Opportunities for Nike and BROADWIND ENRGY

-0.1

Correlation Coefficient

Nike  BROADWIND ENRGY

Good diversification

The 3 months correlation between Nike and BROADWIND is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and BROADWIND ENRGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BROADWIND ENRGY 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 BROADWIND ENRGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BROADWIND ENRGY has no effect on the direction of Nike i.e., Nike and BROADWIND ENRGY go up and down completely randomly.

Pair Corralation between Nike and BROADWIND ENRGY

Assuming the 90 days trading horizon Nike Inc is expected to under-perform the BROADWIND ENRGY. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 3.18 times less risky than BROADWIND ENRGY. The stock trades about -0.03 of its potential returns per unit of risk. The BROADWIND ENRGY is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  186.00  in BROADWIND ENRGY on October 26, 2024 and sell it today you would lose (12.00) from holding BROADWIND ENRGY or give up 6.45% of portfolio value over 90 days.

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

Nike Inc  vs.  BROADWIND ENRGY

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 comparatively stable technical and fundamental indicators, Nike is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BROADWIND ENRGY

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days BROADWIND ENRGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BROADWIND ENRGY is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nike and BROADWIND ENRGY

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

The idea behind Nike Inc and BROADWIND ENRGY 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.