Correlation Between Nike and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Nike and Iridium Communications 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 Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Iridium Communications, you can compare the effects of market volatilities on Nike and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Iridium Communications.
Diversification Opportunities for Nike and Iridium Communications
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nike and Iridium is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Nike i.e., Nike and Iridium Communications go up and down completely randomly.
Pair Corralation between Nike and Iridium Communications
Considering the 90-day investment horizon Nike is expected to generate 1.91 times less return on investment than Iridium Communications. But when comparing it to its historical volatility, Nike Inc is 1.43 times less risky than Iridium Communications. It trades about 0.02 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,975 in Iridium Communications on August 28, 2024 and sell it today you would earn a total of 24.00 from holding Iridium Communications or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Iridium Communications
Performance |
| Timeline |
| Nike Inc |
| Iridium Communications |
Nike and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Iridium Communications
The main advantage of trading using opposite Nike and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.The idea behind Nike Inc and Iridium Communications 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |