Correlation Between Nike and Integrated Drilling

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

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

Diversification Opportunities for Nike and Integrated Drilling

0.0

Correlation Coefficient

Nike  Integrated Drilling

Pay attention - limited upside

The 3 months correlation between Nike and Integrated is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Integrated Drilling Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Drilling 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 Integrated Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Drilling has no effect on the direction of Nike i.e., Nike and Integrated Drilling go up and down completely randomly.

Pair Corralation between Nike and Integrated Drilling

If you would invest  5.00  in Integrated Drilling Equipment on September 15, 2024 and sell it today you would earn a total of  0.00  from holding Integrated Drilling Equipment or generate 0.0% return on investment over 90 days.

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

Nike Inc  vs.  Integrated Drilling Equipment

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 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.

Integrated Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrated Drilling Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Integrated Drilling is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nike and Integrated Drilling

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

The idea behind Nike Inc and Integrated Drilling Equipment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.