Correlation Between NIKE and American Hotel
Can any of the company-specific risk be diversified away by investing in both NIKE and American Hotel 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 American Hotel 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 American Hotel Income, you can compare the effects of market volatilities on NIKE and American Hotel 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 American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIKE and American Hotel.
Diversification Opportunities for NIKE and American Hotel
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NIKE and American is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc CDR and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income 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 American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of NIKE i.e., NIKE and American Hotel go up and down completely randomly.
Pair Corralation between NIKE and American Hotel
Assuming the 90 days trading horizon NIKE Inc CDR is expected to under-perform the American Hotel. But the stock apears to be less risky and, when comparing its historical volatility, NIKE Inc CDR is 4.69 times less risky than American Hotel. The stock trades about -0.21 of its potential returns per unit of risk. The American Hotel Income is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 50.00 in American Hotel Income on October 23, 2024 and sell it today you would earn a total of 13.00 from holding American Hotel Income or generate 26.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
NIKE Inc CDR vs. American Hotel Income
Performance |
| Timeline |
| NIKE Inc CDR |
| American Hotel Income |
NIKE and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NIKE and American Hotel
The main advantage of trading using opposite NIKE and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIKE position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| NIKE vs. 2028 Investment Grade | NIKE vs. Titanium Transportation Group | NIKE vs. Cogeco Communications | NIKE vs. Queens Road Capital |
| American Hotel vs. Orca Energy Group | American Hotel vs. Rogers Communications | American Hotel vs. Aclara Resources | American Hotel vs. Buhler Industries |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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