Correlation Between Nike and CapitaLand Investment
Can any of the company-specific risk be diversified away by investing in both Nike and CapitaLand Investment 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 CapitaLand Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and CapitaLand Investment Limited, you can compare the effects of market volatilities on Nike and CapitaLand Investment 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 CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and CapitaLand Investment.
Diversification Opportunities for Nike and CapitaLand Investment
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Nike and CapitaLand is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of Nike i.e., Nike and CapitaLand Investment go up and down completely randomly.
Pair Corralation between Nike and CapitaLand Investment
Considering the 90-day investment horizon Nike Inc is expected to under-perform the CapitaLand Investment. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 2.34 times less risky than CapitaLand Investment. The stock trades about -0.02 of its potential returns per unit of risk. The CapitaLand Investment Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 234.00 in CapitaLand Investment Limited on September 2, 2024 and sell it today you would lose (52.00) from holding CapitaLand Investment Limited or give up 22.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. CapitaLand Investment Limited
Performance |
| Timeline |
| Nike Inc |
| CapitaLand Investment |
Nike and CapitaLand Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and CapitaLand Investment
The main advantage of trading using opposite Nike and CapitaLand Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, CapitaLand Investment 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 CapitaLand Investment will offset losses from the drop in CapitaLand Investment's long position.The idea behind Nike Inc and CapitaLand Investment Limited 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.| CapitaLand Investment vs. IRSA Inversiones Y | CapitaLand Investment vs. Anywhere Real Estate | CapitaLand Investment vs. Newmark Group | CapitaLand Investment vs. New York City |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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