Correlation Between Nike and Under Armour

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

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

Diversification Opportunities for Nike and Under Armour

0.02

Correlation Coefficient

Nike  Under Armour

Significant diversification

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

Pair Corralation between Nike and Under Armour

Considering the 90-day investment horizon Nike Inc is expected to generate 1.05 times more return on investment than Under Armour. However, Nike is 1.05 times more volatile than Under Armour C. It trades about -0.1 of its potential returns per unit of risk. Under Armour C is currently generating about -0.16 per unit of risk. If you would invest  7,655  in Nike Inc on December 26, 2024 and sell it today you would lose (1,001) from holding Nike Inc or give up 13.08% of portfolio value over 90 days.

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

Nike Inc  vs.  Under Armour C

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.

Under Armour C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Under Armour C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nike and Under Armour

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

The idea behind Nike Inc and Under Armour C 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.