Correlation Between Nike and Jerash Holdings

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

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

Diversification Opportunities for Nike and Jerash Holdings

-0.02

Correlation Coefficient

Nike  Jerash Holdings

Good diversification

The 3 months correlation between Nike and Jerash is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Jerash Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jerash Holdings 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 Jerash Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jerash Holdings has no effect on the direction of Nike i.e., Nike and Jerash Holdings go up and down completely randomly.

Pair Corralation between Nike and Jerash Holdings

Considering the 90-day investment horizon Nike is expected to generate 3.75 times less return on investment than Jerash Holdings. In addition to that, Nike is 1.09 times more volatile than Jerash Holdings. It trades about 0.02 of its total potential returns per unit of risk. Jerash Holdings is currently generating about 0.08 per unit of volatility. If you would invest  340.00  in Jerash Holdings on December 1, 2024 and sell it today you would earn a total of  26.00  from holding Jerash Holdings or generate 7.65% return on investment over 90 days.

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

Nike Inc  vs.  Jerash Holdings

Nike Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Jerash Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jerash Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Jerash Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nike and Jerash Holdings

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

The idea behind Nike Inc and Jerash Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.