Correlation Between Wingstop and Nike

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

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

Diversification Opportunities for Wingstop and Nike

-0.02

Correlation Coefficient

Wingstop  Nike

Good diversification

The 3 months correlation between Wingstop and Nike is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Wingstop and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Wingstop 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 Wingstop 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 Wingstop i.e., Wingstop and Nike go up and down completely randomly.

Pair Corralation between Wingstop and Nike

Given the investment horizon of 90 days Wingstop is expected to under-perform the Nike. In addition to that, Wingstop is 1.5 times more volatile than Nike Inc. It trades about -0.11 of its total potential returns per unit of risk. Nike Inc is currently generating about -0.11 per unit of volatility. If you would invest  7,427  in Nike Inc on December 28, 2024 and sell it today you would lose (1,098) from holding Nike Inc or give up 14.78% of portfolio value over 90 days.

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

Wingstop  vs.  Nike Inc

Wingstop

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wingstop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Nike Inc

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Wingstop and Nike

The main advantage of trading using opposite Wingstop and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wingstop 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 Wingstop 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.