Correlation Between Nike and Food Life
Can any of the company-specific risk be diversified away by investing in both Nike and Food Life 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 Food Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Food Life Companies, you can compare the effects of market volatilities on Nike and Food Life 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 Food Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Food Life.
Diversification Opportunities for Nike and Food Life
Good diversification
The 3 months correlation between Nike and Food is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Food Life Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Food Life Companies 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 Food Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Food Life Companies has no effect on the direction of Nike i.e., Nike and Food Life go up and down completely randomly.
Pair Corralation between Nike and Food Life
Assuming the 90 days horizon Nike Inc is expected to under-perform the Food Life. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.07 times less risky than Food Life. The stock trades about -0.06 of its potential returns per unit of risk. The Food Life Companies is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,770 in Food Life Companies on September 28, 2024 and sell it today you would earn a total of 330.00 from holding Food Life Companies or generate 18.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Food Life Companies
Performance |
| Timeline |
| Nike Inc |
| Food Life Companies |
Nike and Food Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Food Life
The main advantage of trading using opposite Nike and Food Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Food Life 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 Food Life will offset losses from the drop in Food Life's long position.| Nike vs. Strategic Investments AS | Nike vs. alstria office REIT AG | Nike vs. MAGIC SOFTWARE ENTR | Nike vs. PennyMac Mortgage Investment |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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