Correlation Between Tri Pointe and Nike

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

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

Diversification Opportunities for Tri Pointe and Nike

0.47

Correlation Coefficient

Tri Pointe  Nike

Very weak diversification

The 3 months correlation between Tri and Nike is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Tri Pointe Homes and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Tri Pointe 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 Tri Pointe Homes 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 Tri Pointe i.e., Tri Pointe and Nike go up and down completely randomly.

Pair Corralation between Tri Pointe and Nike

Assuming the 90 days horizon Tri Pointe Homes is expected to generate 0.96 times more return on investment than Nike. However, Tri Pointe Homes is 1.05 times less risky than Nike. It trades about 0.04 of its potential returns per unit of risk. Nike Inc is currently generating about -0.04 per unit of risk. If you would invest  3,420  in Tri Pointe Homes on September 19, 2024 and sell it today you would earn a total of  260.00  from holding Tri Pointe Homes or generate 7.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.22%
Values	Daily Returns

Tri Pointe Homes  vs.  Nike Inc

Tri Pointe Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tri Pointe Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Nike Inc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Tri Pointe and Nike

The main advantage of trading using opposite Tri Pointe and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tri Pointe 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 Tri Pointe Homes 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 Stocks Directory module to find actively traded stocks across global markets.