Correlation Between Designer Brands and Nike
Can any of the company-specific risk be diversified away by investing in both Designer Brands 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 Designer Brands and Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Designer Brands and Nike Inc, you can compare the effects of market volatilities on Designer Brands 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 Designer Brands with a short position of Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Designer Brands and Nike.
Diversification Opportunities for Designer Brands and Nike
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Designer and Nike is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Designer Brands and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Designer Brands 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 Designer Brands 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 Designer Brands i.e., Designer Brands and Nike go up and down completely randomly.
Pair Corralation between Designer Brands and Nike
Considering the 90-day investment horizon Designer Brands is expected to under-perform the Nike. In addition to that, Designer Brands is 1.73 times more volatile than Nike Inc. It trades about -0.19 of its total potential returns per unit of risk. Nike Inc is currently generating about -0.06 per unit of volatility. If you would invest 7,904 in Nike Inc on August 25, 2024 and sell it today you would lose (166.00) from holding Nike Inc or give up 2.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Designer Brands vs. Nike Inc
Performance |
| Timeline |
| Designer Brands |
| Nike Inc |
Designer Brands and Nike Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Designer Brands and Nike
The main advantage of trading using opposite Designer Brands and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Designer Brands 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.| Designer Brands vs. Wolverine World Wide | Designer Brands vs. Weyco Group | Designer Brands vs. Steven Madden | Designer Brands vs. Rocky Brands |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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