Correlation Between Dow Jones and Nike
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Nike Inc, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Nike.
Diversification Opportunities for Dow Jones and Nike
Good diversification
The 3 months correlation between Dow and Nike is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Nike go up and down completely randomly.
Pair Corralation between Dow Jones and Nike
Assuming the 90 days trading horizon Dow Jones is expected to generate 37.6 times less return on investment than Nike. But when comparing it to its historical volatility, Dow Jones Industrial is 2.91 times less risky than Nike. It trades about 0.01 of its potential returns per unit of risk. Nike Inc is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 7,013 in Nike Inc on September 19, 2024 and sell it today you would earn a total of 460.00 from holding Nike Inc or generate 6.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Nike Inc
Performance |
| Timeline |
Dow Jones and Nike Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Nike Inc
Pair trading matchups for Nike
Pair Trading with Dow Jones and Nike
The main advantage of trading using opposite Dow Jones and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Mangazeya Mining | Dow Jones vs. Summit Materials | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. AMCON Distributing |
| Nike vs. Deckers Outdoor | Nike vs. Superior Plus Corp | Nike vs. NMI Holdings | Nike vs. SIVERS SEMICONDUCTORS AB |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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