Correlation Between Nike and American Healthcare

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

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

Diversification Opportunities for Nike and American Healthcare

0.28

Correlation Coefficient

Nike  American Healthcare

Modest diversification

The 3 months correlation between Nike and American is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and American Healthcare REIT, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Healthcare REIT, 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 American Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Healthcare REIT, has no effect on the direction of Nike i.e., Nike and American Healthcare go up and down completely randomly.

Pair Corralation between Nike and American Healthcare

Considering the 90-day investment horizon Nike is expected to generate 1.84 times less return on investment than American Healthcare. In addition to that, Nike is 1.31 times more volatile than American Healthcare REIT,. It trades about 0.06 of its total potential returns per unit of risk. American Healthcare REIT, is currently generating about 0.14 per unit of volatility. If you would invest  2,886  in American Healthcare REIT, on December 4, 2024 and sell it today you would earn a total of  159.50  from holding American Healthcare REIT, or generate 5.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Nike Inc  vs.  American Healthcare REIT,

Nike Inc

Risk-Adjusted Performance

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 rather sound forward-looking signals, Nike is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

American Healthcare REIT,

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT, are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical indicators, American Healthcare may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nike and American Healthcare

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

The idea behind Nike Inc and American Healthcare REIT, 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.