Correlation Between Nike and CVR Partners

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

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

Diversification Opportunities for Nike and CVR Partners

-0.25

Correlation Coefficient

Nike  CVR Partners

Very good diversification

The 3 months correlation between Nike and CVR is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and CVR Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Partners LP 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 CVR Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Partners LP has no effect on the direction of Nike i.e., Nike and CVR Partners go up and down completely randomly.

Pair Corralation between Nike and CVR Partners

Considering the 90-day investment horizon Nike Inc is expected to under-perform the CVR Partners. In addition to that, Nike is 1.27 times more volatile than CVR Partners LP. It trades about -0.27 of its total potential returns per unit of risk. CVR Partners LP is currently generating about -0.1 per unit of volatility. If you would invest  7,854  in CVR Partners LP on October 6, 2024 and sell it today you would lose (157.00) from holding CVR Partners LP or give up 2.0% 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.  CVR Partners LP

Nike Inc

Risk-Adjusted Performance

0 of 100

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 latest conflicting performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

CVR Partners LP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Partners LP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, CVR Partners displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nike and CVR Partners

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

The idea behind Nike Inc and CVR Partners LP 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..