Correlation Between Nike and Tandem Diabetes

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

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

Diversification Opportunities for Nike and Tandem Diabetes

-0.04

Correlation Coefficient

Nike  Tandem Diabetes

Good diversification

The 3 months correlation between Nike and Tandem is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Tandem Diabetes Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandem Diabetes Care 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 Tandem Diabetes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandem Diabetes Care has no effect on the direction of Nike i.e., Nike and Tandem Diabetes go up and down completely randomly.

Pair Corralation between Nike and Tandem Diabetes

Considering the 90-day investment horizon Nike Inc is expected to generate 0.4 times more return on investment than Tandem Diabetes. However, Nike Inc is 2.52 times less risky than Tandem Diabetes. It trades about -0.1 of its potential returns per unit of risk. Tandem Diabetes Care is currently generating about -0.16 per unit of risk. If you would invest  7,604  in Nike Inc on December 27, 2024 and sell it today you would lose (950.00) from holding Nike Inc or give up 12.49% of portfolio value over 90 days.

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

Nike Inc  vs.  Tandem Diabetes Care

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.

Tandem Diabetes Care

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tandem Diabetes Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nike and Tandem Diabetes

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

The idea behind Nike Inc and Tandem Diabetes Care 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.