Correlation Between NIKE and Advanced Micro
Can any of the company-specific risk be diversified away by investing in both NIKE and Advanced Micro 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 Advanced Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NIKE Inc CDR and Advanced Micro Devices, you can compare the effects of market volatilities on NIKE and Advanced Micro 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 Advanced Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIKE and Advanced Micro.
Diversification Opportunities for NIKE and Advanced Micro
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NIKE and Advanced is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc CDR and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 CDR are associated (or correlated) with Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of NIKE i.e., NIKE and Advanced Micro go up and down completely randomly.
Pair Corralation between NIKE and Advanced Micro
Assuming the 90 days trading horizon NIKE Inc CDR is expected to under-perform the Advanced Micro. But the stock apears to be less risky and, when comparing its historical volatility, NIKE Inc CDR is 1.47 times less risky than Advanced Micro. The stock trades about -0.03 of its potential returns per unit of risk. The Advanced Micro Devices is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,295 in Advanced Micro Devices on August 27, 2024 and sell it today you would earn a total of 331.00 from holding Advanced Micro Devices or generate 14.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NIKE Inc CDR vs. Advanced Micro Devices
Performance |
| Timeline |
| NIKE Inc CDR |
| Advanced Micro Devices |
NIKE and Advanced Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NIKE and Advanced Micro
The main advantage of trading using opposite NIKE and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIKE position performs unexpectedly, Advanced Micro 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 Advanced Micro will offset losses from the drop in Advanced Micro's long position.The idea behind NIKE Inc CDR and Advanced Micro Devices 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.| Advanced Micro vs. Bausch Health Companies | Advanced Micro vs. Birchtech Corp | Advanced Micro vs. Leveljump Healthcare Corp | Advanced Micro vs. Jamieson Wellness |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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