Correlation Between Nike and Mazda

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

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

Diversification Opportunities for Nike and Mazda

-0.29

Correlation Coefficient

Nike  Mazda

Very good diversification

The 3 months correlation between Nike and Mazda is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Mazda Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazda Motor 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 Mazda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazda Motor has no effect on the direction of Nike i.e., Nike and Mazda go up and down completely randomly.

Pair Corralation between Nike and Mazda

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Mazda. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.28 times less risky than Mazda. The stock trades about -0.11 of its potential returns per unit of risk. The Mazda Motor is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  675.00  in Mazda Motor on December 26, 2024 and sell it today you would earn a total of  55.00  from holding Mazda Motor or generate 8.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Nike Inc  vs.  Mazda Motor

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.

Mazda Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mazda Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Mazda may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nike and Mazda

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

The idea behind Nike Inc and Mazda Motor 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .