Correlation Between Penta Ocean and Nike

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

By analyzing existing cross correlation between Penta Ocean Construction Co and Nike Inc, you can compare the effects of market volatilities on Penta Ocean and Nike 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 Penta Ocean with a short position of Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and Nike.

Diversification Opportunities for Penta Ocean and Nike

0.6

Correlation Coefficient

Penta Ocean  Nike

Poor diversification

The 3 months correlation between Penta and Nike is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Penta Ocean 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 Penta Ocean Construction Co are associated (or correlated) with Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Penta Ocean i.e., Penta Ocean and Nike go up and down completely randomly.

Pair Corralation between Penta Ocean and Nike

Assuming the 90 days horizon Penta Ocean Construction Co is expected to generate 1.1 times more return on investment than Nike. However, Penta Ocean is 1.1 times more volatile than Nike Inc. It trades about 0.15 of its potential returns per unit of risk. Nike Inc is currently generating about -0.2 per unit of risk. If you would invest  382.00  in Penta Ocean Construction Co on October 6, 2024 and sell it today you would earn a total of  14.00  from holding Penta Ocean Construction Co or generate 3.66% return on investment over 90 days.

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

Penta Ocean Construction Co  vs.  Nike Inc

Penta Ocean Construc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penta Ocean Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Penta Ocean is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 comparatively stable technical and fundamental indicators, Nike is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Penta Ocean and Nike

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

The idea behind Penta Ocean Construction Co and Nike Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.