Correlation Between NIKE and Compania
Can any of the company-specific risk be diversified away by investing in both NIKE and Compania 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 NIKE and Compania into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NIKE Inc and Compania de Transporte, you can compare the effects of market volatilities on NIKE and Compania 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 NIKE with a short position of Compania. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIKE and Compania.
Diversification Opportunities for NIKE and Compania
Pay attention - limited upside
The 3 months correlation between NIKE and Compania is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc and Compania de Transporte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania de Transporte and NIKE 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 NIKE Inc are associated (or correlated) with Compania. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania de Transporte has no effect on the direction of NIKE i.e., NIKE and Compania go up and down completely randomly.
Pair Corralation between NIKE and Compania
Assuming the 90 days trading horizon NIKE is expected to generate 3.25 times less return on investment than Compania. But when comparing it to its historical volatility, NIKE Inc is 2.76 times less risky than Compania. It trades about 0.23 of its potential returns per unit of risk. Compania de Transporte is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 221,500 in Compania de Transporte on September 20, 2024 and sell it today you would earn a total of 70,000 from holding Compania de Transporte or generate 31.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NIKE Inc vs. Compania de Transporte
Performance |
| Timeline |
| NIKE Inc |
| Compania de Transporte |
NIKE and Compania Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NIKE and Compania
The main advantage of trading using opposite NIKE and Compania positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIKE position performs unexpectedly, Compania 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 Compania will offset losses from the drop in Compania's long position.The idea behind NIKE Inc and Compania de Transporte 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.| Compania vs. Edesa Holding SA | Compania vs. Vista Energy, SAB | Compania vs. United States Steel | Compania vs. Pfizer Inc |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |