Correlation Between Nike and HNI Corp
Can any of the company-specific risk be diversified away by investing in both Nike and HNI Corp 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 HNI Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and HNI Corp, you can compare the effects of market volatilities on Nike and HNI Corp 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 HNI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and HNI Corp.
Diversification Opportunities for Nike and HNI Corp
Good diversification
The 3 months correlation between Nike and HNI is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and HNI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI Corp 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 HNI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corp has no effect on the direction of Nike i.e., Nike and HNI Corp go up and down completely randomly.
Pair Corralation between Nike and HNI Corp
Considering the 90-day investment horizon Nike Inc is expected to under-perform the HNI Corp. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.23 times less risky than HNI Corp. The stock trades about -0.06 of its potential returns per unit of risk. The HNI Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 5,228 in HNI Corp on August 25, 2024 and sell it today you would earn a total of 389.00 from holding HNI Corp or generate 7.44% 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. HNI Corp
Performance |
| Timeline |
| Nike Inc |
| HNI Corp |
Nike and HNI Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and HNI Corp
The main advantage of trading using opposite Nike and HNI Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, HNI Corp 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 HNI Corp will offset losses from the drop in HNI Corp's long position.The idea behind Nike Inc and HNI Corp 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.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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