Correlation Between United States and NIKE

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

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

Diversification Opportunities for United States and NIKE

-0.05

Correlation Coefficient

United States  NIKE

Good diversification

The 3 months correlation between United and NIKE is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and NIKE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKE Inc and United States 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 United States Steel 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 United States i.e., United States and NIKE go up and down completely randomly.

Pair Corralation between United States and NIKE

Given the investment horizon of 90 days United States Steel is expected to generate 1.46 times more return on investment than NIKE. However, United States is 1.46 times more volatile than NIKE Inc. It trades about 0.06 of its potential returns per unit of risk. NIKE Inc is currently generating about -0.12 per unit of risk. If you would invest  1,275,000  in United States Steel on September 5, 2024 and sell it today you would earn a total of  112,500  from holding United States Steel or generate 8.82% return on investment over 90 days.

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

United States Steel  vs.  NIKE Inc

United States Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, United States may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with United States and NIKE

The main advantage of trading using opposite United States and NIKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Steel 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.