Correlation Between Nike and Air Lease
Can any of the company-specific risk be diversified away by investing in both Nike and Air Lease 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 Air Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Air Lease, you can compare the effects of market volatilities on Nike and Air Lease 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 Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Air Lease.
Diversification Opportunities for Nike and Air Lease
Very good diversification
The 3 months correlation between Nike and Air is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Nike i.e., Nike and Air Lease go up and down completely randomly.
Pair Corralation between Nike and Air Lease
Considering the 90-day investment horizon Nike is expected to generate 5.96 times less return on investment than Air Lease. But when comparing it to its historical volatility, Nike Inc is 1.1 times less risky than Air Lease. It trades about 0.07 of its potential returns per unit of risk. Air Lease is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 4,435 in Air Lease on September 1, 2024 and sell it today you would earn a total of 655.00 from holding Air Lease or generate 14.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Air Lease
Performance |
| Timeline |
| Nike Inc |
| Air Lease |
Nike and Air Lease Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Air Lease
The main advantage of trading using opposite Nike and Air Lease positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Air Lease 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 Air Lease will offset losses from the drop in Air Lease's long position.The idea behind Nike Inc and Air Lease 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.| Air Lease vs. Alta Equipment Group | Air Lease vs. McGrath RentCorp | Air Lease vs. Herc Holdings | Air Lease vs. GATX Corporation |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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