Correlation Between Nike and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Nike and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Dow Jones Industrial, you can compare the effects of market volatilities on Nike and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Dow Jones.
Diversification Opportunities for Nike and Dow Jones
Good diversification
The 3 months correlation between Nike and Dow is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Nike i.e., Nike and Dow Jones go up and down completely randomly.
Pair Corralation between Nike and Dow Jones
Assuming the 90 days horizon Nike Inc is expected to under-perform the Dow Jones. In addition to that, Nike is 2.89 times more volatile than Dow Jones Industrial. It trades about -0.04 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.07 per unit of volatility. If you would invest 3,754,533 in Dow Jones Industrial on September 20, 2024 and sell it today you would earn a total of 478,154 from holding Dow Jones Industrial or generate 12.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Nike Inc vs. Dow Jones Industrial
Performance |
| Timeline |
Nike and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Nike Inc
Pair trading matchups for Nike
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Nike and Dow Jones
The main advantage of trading using opposite Nike and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Nike vs. Take Two Interactive Software | Nike vs. Sims Metal Management | Nike vs. AXWAY SOFTWARE EO | Nike vs. Cleanaway Waste Management |
| Dow Jones vs. Digi International | Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. United Microelectronics | Dow Jones vs. Weibo Corp |
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.
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