Correlation Between Nike and Tandy Leather

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

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

Diversification Opportunities for Nike and Tandy Leather

0.2

Correlation Coefficient

Nike  Tandy Leather

Modest diversification

The 3 months correlation between Nike and Tandy is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Tandy Leather Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandy Leather Factory 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 Tandy Leather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandy Leather Factory has no effect on the direction of Nike i.e., Nike and Tandy Leather go up and down completely randomly.

Pair Corralation between Nike and Tandy Leather

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Tandy Leather. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.33 times less risky than Tandy Leather. The stock trades about -0.1 of its potential returns per unit of risk. The Tandy Leather Factory is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  347.00  in Tandy Leather Factory on December 26, 2024 and sell it today you would lose (46.00) from holding Tandy Leather Factory or give up 13.26% 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.  Tandy Leather Factory

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.

Tandy Leather Factory

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tandy Leather Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Nike and Tandy Leather

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

The idea behind Nike Inc and Tandy Leather Factory 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 Stocks Directory module to find actively traded stocks across global markets.