Correlation Between Nike and Eastern

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

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

Diversification Opportunities for Nike and Eastern

0.77

Correlation Coefficient

Nike  Eastern

Poor diversification

The 3 months correlation between Nike and Eastern is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern 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 Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Nike i.e., Nike and Eastern go up and down completely randomly.

Pair Corralation between Nike and Eastern

Considering the 90-day investment horizon Nike Inc is expected to generate 0.52 times more return on investment than Eastern. However, Nike Inc is 1.93 times less risky than Eastern. It trades about -0.27 of its potential returns per unit of risk. Eastern Co is currently generating about -0.17 per unit of risk. If you would invest  7,858  in Nike Inc on October 6, 2024 and sell it today you would lose (527.00) from holding Nike Inc or give up 6.71% of portfolio value over 90 days.

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

Nike Inc  vs.  Eastern Co

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 latest conflicting performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Nike and Eastern

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

The idea behind Nike Inc and Eastern Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.