Correlation Between Nike and Baozun
Can any of the company-specific risk be diversified away by investing in both Nike and Baozun 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 Baozun into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Baozun Inc, you can compare the effects of market volatilities on Nike and Baozun 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 Baozun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Baozun.
Diversification Opportunities for Nike and Baozun
Very weak diversification
The 3 months correlation between Nike and Baozun is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Baozun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baozun Inc 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 Baozun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baozun Inc has no effect on the direction of Nike i.e., Nike and Baozun go up and down completely randomly.
Pair Corralation between Nike and Baozun
Considering the 90-day investment horizon Nike is expected to generate 2.0 times less return on investment than Baozun. But when comparing it to its historical volatility, Nike Inc is 4.15 times less risky than Baozun. It trades about 0.1 of its potential returns per unit of risk. Baozun Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 266.00 in Baozun Inc on September 12, 2024 and sell it today you would earn a total of 8.00 from holding Baozun Inc or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Baozun Inc
Performance |
| Timeline |
| Nike Inc |
| Baozun Inc |
Nike and Baozun Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Baozun
The main advantage of trading using opposite Nike and Baozun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Baozun 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 Baozun will offset losses from the drop in Baozun's long position.The idea behind Nike Inc and Baozun Inc 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.| Baozun vs. PDD Holdings | Baozun vs. JD Inc Adr | Baozun vs. Global E Online | Baozun vs. Vipshop Holdings Limited |
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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