Correlation Between Nike and Jeld Wen
Can any of the company-specific risk be diversified away by investing in both Nike and Jeld Wen 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 Jeld Wen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Jeld Wen Holding, you can compare the effects of market volatilities on Nike and Jeld Wen 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 Jeld Wen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Jeld Wen.
Diversification Opportunities for Nike and Jeld Wen
Poor diversification
The 3 months correlation between Nike and Jeld is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Jeld Wen Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeld Wen Holding 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 Jeld Wen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeld Wen Holding has no effect on the direction of Nike i.e., Nike and Jeld Wen go up and down completely randomly.
Pair Corralation between Nike and Jeld Wen
Considering the 90-day investment horizon Nike Inc is expected to generate 0.21 times more return on investment than Jeld Wen. However, Nike Inc is 4.79 times less risky than Jeld Wen. It trades about 0.07 of its potential returns per unit of risk. Jeld Wen Holding is currently generating about -0.12 per unit of risk. If you would invest 7,719 in Nike Inc on September 3, 2024 and sell it today you would earn a total of 158.00 from holding Nike Inc or generate 2.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Jeld Wen Holding
Performance |
| Timeline |
| Nike Inc |
| Jeld Wen Holding |
Nike and Jeld Wen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Jeld Wen
The main advantage of trading using opposite Nike and Jeld Wen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Jeld Wen 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 Jeld Wen will offset losses from the drop in Jeld Wen's long position.The idea behind Nike Inc and Jeld Wen Holding 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.| Jeld Wen vs. Gibraltar Industries | Jeld Wen vs. Quanex Building Products | Jeld Wen vs. Perma Pipe International Holdings | Jeld Wen vs. Interface |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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