Correlation Between Nike and Levi Strauss

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

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

Diversification Opportunities for Nike and Levi Strauss

0.24

Correlation Coefficient

Nike  Levi Strauss

Modest diversification

The 3 months correlation between Nike and Levi is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Levi Strauss Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Levi Strauss 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 Levi Strauss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Levi Strauss has no effect on the direction of Nike i.e., Nike and Levi Strauss go up and down completely randomly.

Pair Corralation between Nike and Levi Strauss

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Levi Strauss. In addition to that, Nike is 1.0 times more volatile than Levi Strauss Co. It trades about -0.1 of its total potential returns per unit of risk. Levi Strauss Co is currently generating about -0.04 per unit of volatility. If you would invest  1,706  in Levi Strauss Co on December 27, 2024 and sell it today you would lose (97.00) from holding Levi Strauss Co or give up 5.69% of portfolio value over 90 days.

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

Nike Inc  vs.  Levi Strauss Co

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 conflicting performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Levi Strauss

Risk-Adjusted Performance

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Levi Strauss is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Nike and Levi Strauss

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

The idea behind Nike Inc and Levi Strauss 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.

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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.