Correlation Between Nike and Mativ Holdings
Can any of the company-specific risk be diversified away by investing in both Nike and Mativ Holdings 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 Mativ Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Mativ Holdings, you can compare the effects of market volatilities on Nike and Mativ Holdings 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 Mativ Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Mativ Holdings.
Diversification Opportunities for Nike and Mativ Holdings
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nike and Mativ is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Mativ Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mativ Holdings 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 Mativ Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mativ Holdings has no effect on the direction of Nike i.e., Nike and Mativ Holdings go up and down completely randomly.
Pair Corralation between Nike and Mativ Holdings
Considering the 90-day investment horizon Nike Inc is expected to generate 0.29 times more return on investment than Mativ Holdings. However, Nike Inc is 3.45 times less risky than Mativ Holdings. It trades about 0.02 of its potential returns per unit of risk. Mativ Holdings is currently generating about -0.08 per unit of risk. If you would invest 7,891 in Nike Inc on August 28, 2024 and sell it today you would earn a total of 35.00 from holding Nike Inc or generate 0.44% 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. Mativ Holdings
Performance |
| Timeline |
| Nike Inc |
| Mativ Holdings |
Nike and Mativ Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Mativ Holdings
The main advantage of trading using opposite Nike and Mativ Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Mativ Holdings 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 Mativ Holdings will offset losses from the drop in Mativ Holdings' long position.The idea behind Nike Inc and Mativ Holdings 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.| Mativ Holdings vs. Orion Engineered Carbons | Mativ Holdings vs. Select Energy Services | Mativ Holdings vs. Perimeter Solutions SA | Mativ Holdings vs. FutureFuel Corp |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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