Correlation Between NIKE and Microsoft Corp
Can any of the company-specific risk be diversified away by investing in both NIKE and Microsoft Corp 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 Microsoft Corp 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 Microsoft Corp CDR, you can compare the effects of market volatilities on NIKE and Microsoft Corp 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 Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIKE and Microsoft Corp.
Diversification Opportunities for NIKE and Microsoft Corp
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NIKE and Microsoft is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc CDR and Microsoft Corp CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp CDR 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 Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp CDR has no effect on the direction of NIKE i.e., NIKE and Microsoft Corp go up and down completely randomly.
Pair Corralation between NIKE and Microsoft Corp
Assuming the 90 days trading horizon NIKE Inc CDR is expected to generate 0.96 times more return on investment than Microsoft Corp. However, NIKE Inc CDR is 1.04 times less risky than Microsoft Corp. It trades about 0.1 of its potential returns per unit of risk. Microsoft Corp CDR is currently generating about -0.07 per unit of risk. If you would invest 1,427 in NIKE Inc CDR on August 31, 2024 and sell it today you would earn a total of 48.00 from holding NIKE Inc CDR or generate 3.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NIKE Inc CDR vs. Microsoft Corp CDR
Performance |
| Timeline |
| NIKE Inc CDR |
| Microsoft Corp CDR |
NIKE and Microsoft Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NIKE and Microsoft Corp
The main advantage of trading using opposite NIKE and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIKE position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.| NIKE vs. Metalero Mining Corp | NIKE vs. High Liner Foods | NIKE vs. Capstone Mining Corp | NIKE vs. Gfl Environmental Holdings |
| Microsoft Corp vs. Mene Inc | Microsoft Corp vs. Africa Oil Corp | Microsoft Corp vs. Financial 15 Split | Microsoft Corp vs. Rubicon Organics |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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