Correlation Between Nike and Dream Homes
Can any of the company-specific risk be diversified away by investing in both Nike and Dream Homes 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 Dream Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Dream Homes Development, you can compare the effects of market volatilities on Nike and Dream Homes 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 Dream Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Dream Homes.
Diversification Opportunities for Nike and Dream Homes
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nike and Dream is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Dream Homes Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Homes Development 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 Dream Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Homes Development has no effect on the direction of Nike i.e., Nike and Dream Homes go up and down completely randomly.
Pair Corralation between Nike and Dream Homes
Considering the 90-day investment horizon Nike is expected to generate 229.57 times less return on investment than Dream Homes. But when comparing it to its historical volatility, Nike Inc is 80.64 times less risky than Dream Homes. It trades about 0.07 of its potential returns per unit of risk. Dream Homes Development is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1.20 in Dream Homes Development on September 1, 2024 and sell it today you would earn a total of 3.10 from holding Dream Homes Development or generate 258.33% 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. Dream Homes Development
Performance |
| Timeline |
| Nike Inc |
| Dream Homes Development |
Nike and Dream Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Dream Homes
The main advantage of trading using opposite Nike and Dream Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Dream Homes 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 Dream Homes will offset losses from the drop in Dream Homes' long position.The idea behind Nike Inc and Dream Homes Development 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.| Dream Homes vs. Greystone Logistics | Dream Homes vs. Mill City Ventures | Dream Homes vs. Black Diamond Group | Dream Homes vs. HUMANA INC |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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