Correlation Between Nike and TYSON FOODS
Can any of the company-specific risk be diversified away by investing in both Nike and TYSON FOODS 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 TYSON FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and TYSON FOODS A , you can compare the effects of market volatilities on Nike and TYSON FOODS 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 TYSON FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and TYSON FOODS.
Diversification Opportunities for Nike and TYSON FOODS
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Nike and TYSON is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and TYSON FOODS A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TYSON FOODS A 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 TYSON FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TYSON FOODS A has no effect on the direction of Nike i.e., Nike and TYSON FOODS go up and down completely randomly.
Pair Corralation between Nike and TYSON FOODS
Assuming the 90 days trading horizon Nike Inc is expected to generate 1.19 times more return on investment than TYSON FOODS. However, Nike is 1.19 times more volatile than TYSON FOODS A . It trades about -0.01 of its potential returns per unit of risk. TYSON FOODS A is currently generating about -0.09 per unit of risk. If you would invest 7,516 in Nike Inc on November 25, 2024 and sell it today you would lose (148.00) from holding Nike Inc or give up 1.97% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Nike Inc vs. TYSON FOODS A
Performance |
Timeline |
Nike Inc |
TYSON FOODS A |
Nike and TYSON FOODS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nike and TYSON FOODS
The main advantage of trading using opposite Nike and TYSON FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, TYSON FOODS 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 TYSON FOODS will offset losses from the drop in TYSON FOODS's long position.The idea behind Nike Inc and TYSON FOODS A 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.TYSON FOODS vs. Vulcan Materials | ||
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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