Correlation Between American Express and NIKE
Can any of the company-specific risk be diversified away by investing in both American Express 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 American Express and NIKE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express Co and NIKE Inc, you can compare the effects of market volatilities on American Express 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 American Express with a short position of NIKE. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and NIKE.
Diversification Opportunities for American Express and NIKE
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and NIKE is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding American Express Co and NIKE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKE Inc and American Express 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 American Express 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 American Express i.e., American Express and NIKE go up and down completely randomly.
Pair Corralation between American Express and NIKE
Assuming the 90 days trading horizon American Express Co is expected to generate 1.02 times more return on investment than NIKE. However, American Express is 1.02 times more volatile than NIKE Inc. It trades about 0.14 of its potential returns per unit of risk. NIKE Inc is currently generating about 0.12 per unit of risk. If you would invest 2,225,000 in American Express Co on September 23, 2024 and sell it today you would earn a total of 107,500 from holding American Express Co or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express Co vs. NIKE Inc
Performance |
| Timeline |
| American Express |
| NIKE Inc |
American Express and NIKE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and NIKE
The main advantage of trading using opposite American Express and NIKE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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.| American Express vs. QUALCOMM Incorporated | American Express vs. United States Steel | American Express vs. Pfizer Inc | American Express vs. Distribuidora de Gas |
| NIKE vs. Transportadora de Gas | NIKE vs. Harmony Gold Mining | NIKE vs. Agrometal SAI | NIKE vs. Telecom Argentina |
Check out your portfolio center.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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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