Correlation Between NIKE and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both NIKE and NextSource Materials 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 NextSource Materials 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 NextSource Materials, you can compare the effects of market volatilities on NIKE and NextSource Materials 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 NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIKE and NextSource Materials.
Diversification Opportunities for NIKE and NextSource Materials
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between NIKE and NextSource is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding NIKE Inc CDR and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials 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 NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of NIKE i.e., NIKE and NextSource Materials go up and down completely randomly.
Pair Corralation between NIKE and NextSource Materials
Assuming the 90 days trading horizon NIKE is expected to generate 1.79 times less return on investment than NextSource Materials. But when comparing it to its historical volatility, NIKE Inc CDR is 4.01 times less risky than NextSource Materials. It trades about 0.13 of its potential returns per unit of risk. NextSource Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 76.00 in NextSource Materials on November 3, 2024 and sell it today you would earn a total of 3.00 from holding NextSource Materials or generate 3.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NIKE Inc CDR vs. NextSource Materials
Performance |
| Timeline |
| NIKE Inc CDR |
| NextSource Materials |
NIKE and NextSource Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NIKE and NextSource Materials
The main advantage of trading using opposite NIKE and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NIKE position performs unexpectedly, NextSource Materials 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 NextSource Materials will offset losses from the drop in NextSource Materials' long position.| NIKE vs. UnitedHealth Group CDR | NIKE vs. Monument Mining Limited | NIKE vs. Globex Mining Enterprises | NIKE vs. Kootenay Silver |
| NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Northern Graphite | NextSource Materials vs. Lomiko Metals | NextSource Materials vs. Elcora Advanced Materials |
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 Stocks Directory module to find actively traded stocks across global markets.
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