Correlation Between Nike and UOBSP

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

By analyzing existing cross correlation between Nike Inc and UOBSP 3863 07 OCT 32, you can compare the effects of market volatilities on Nike and UOBSP 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 UOBSP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and UOBSP.

Diversification Opportunities for Nike and UOBSP

-0.71

Correlation Coefficient

Nike  UOBSP

Pay attention - limited upside

The 3 months correlation between Nike and UOBSP is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and UOBSP 3863 07 OCT 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UOBSP 3863 07 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 UOBSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UOBSP 3863 07 has no effect on the direction of Nike i.e., Nike and UOBSP go up and down completely randomly.

Pair Corralation between Nike and UOBSP

Considering the 90-day investment horizon Nike Inc is expected to generate 6.37 times more return on investment than UOBSP. However, Nike is 6.37 times more volatile than UOBSP 3863 07 OCT 32. It trades about -0.01 of its potential returns per unit of risk. UOBSP 3863 07 OCT 32 is currently generating about -0.21 per unit of risk. If you would invest  7,800  in Nike Inc on September 12, 2024 and sell it today you would lose (126.00) from holding Nike Inc or give up 1.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	26.56%
Values	Daily Returns

Nike Inc  vs.  UOBSP 3863 07 OCT 32

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 rather sound forward-looking signals, Nike is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

UOBSP 3863 07

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UOBSP 3863 07 OCT 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UOBSP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nike and UOBSP

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

The idea behind Nike Inc and UOBSP 3863 07 OCT 32 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.