Correlation Between Nike and Grounded People
Can any of the company-specific risk be diversified away by investing in both Nike and Grounded People 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 Grounded People into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Grounded People Apparel, you can compare the effects of market volatilities on Nike and Grounded People 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 Grounded People. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Grounded People.
Diversification Opportunities for Nike and Grounded People
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nike and Grounded is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Grounded People Apparel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grounded People Apparel 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 Grounded People. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grounded People Apparel has no effect on the direction of Nike i.e., Nike and Grounded People go up and down completely randomly.
Pair Corralation between Nike and Grounded People
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Grounded People. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 2.93 times less risky than Grounded People. The stock trades about -0.05 of its potential returns per unit of risk. The Grounded People Apparel is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 101.00 in Grounded People Apparel on October 14, 2024 and sell it today you would earn a total of 2.00 from holding Grounded People Apparel or generate 1.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 98.79% |
| Values | Daily Returns |
Nike Inc vs. Grounded People Apparel
Performance |
| Timeline |
| Nike Inc |
| Grounded People Apparel |
Nike and Grounded People Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Grounded People
The main advantage of trading using opposite Nike and Grounded People positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Grounded People 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 Grounded People will offset losses from the drop in Grounded People's long position.The idea behind Nike Inc and Grounded People Apparel 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.| Grounded People vs. Nike Inc | Grounded People vs. Deckers Outdoor | Grounded People vs. Adidas AG ADR | Grounded People vs. On Holding |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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