Correlation Between Under Armour and Nike

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

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

Diversification Opportunities for Under Armour and Nike

0.36

Correlation Coefficient

Under Armour  Nike

Weak diversification

The 3 months correlation between Under and Nike is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour C and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Under Armour 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 Under Armour C 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 Under Armour i.e., Under Armour and Nike go up and down completely randomly.

Pair Corralation between Under Armour and Nike

Allowing for the 90-day total investment horizon Under Armour C is expected to under-perform the Nike. In addition to that, Under Armour is 1.22 times more volatile than Nike Inc. It trades about -0.25 of its total potential returns per unit of risk. Nike Inc is currently generating about 0.02 per unit of volatility. If you would invest  7,909  in Nike Inc on December 1, 2024 and sell it today you would earn a total of  93.00  from holding Nike Inc or generate 1.18% return on investment over 90 days.

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

Under Armour C  vs.  Nike Inc

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 inconsistent 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.

Nike Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Nike is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Under Armour and Nike

The main advantage of trading using opposite Under Armour and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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 Under Armour C 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.