Correlation Between Nike and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Nike and Nasdaq 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 Nasdaq into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Nasdaq Inc, you can compare the effects of market volatilities on Nike and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Nasdaq.
Diversification Opportunities for Nike and Nasdaq
Excellent diversification
The 3 months correlation between Nike and Nasdaq is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Nike i.e., Nike and Nasdaq go up and down completely randomly.
Pair Corralation between Nike and Nasdaq
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Nasdaq. In addition to that, Nike is 2.11 times more volatile than Nasdaq Inc. It trades about -0.04 of its total potential returns per unit of risk. Nasdaq Inc is currently generating about 0.24 per unit of volatility. If you would invest 5,831 in Nasdaq Inc on September 1, 2024 and sell it today you would earn a total of 2,468 from holding Nasdaq Inc or generate 42.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Nasdaq Inc
Performance |
| Timeline |
| Nike Inc |
| Nasdaq Inc |
Nike and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Nasdaq
The main advantage of trading using opposite Nike and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.The idea behind Nike Inc and Nasdaq Inc 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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