Correlation Between Nike and On Holding
Can any of the company-specific risk be diversified away by investing in both Nike and On Holding 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 On Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and On Holding, you can compare the effects of market volatilities on Nike and On Holding 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 On Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and On Holding.
Diversification Opportunities for Nike and On Holding
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nike and ONON is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and On Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on On 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 On Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of On Holding has no effect on the direction of Nike i.e., Nike and On Holding go up and down completely randomly.
Pair Corralation between Nike and On Holding
Considering the 90-day investment horizon Nike Inc is expected to under-perform the On Holding. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.91 times less risky than On Holding. The stock trades about -0.2 of its potential returns per unit of risk. The On Holding is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 4,738 in On Holding on August 24, 2024 and sell it today you would earn a total of 881.00 from holding On Holding or generate 18.59% 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. On Holding
Performance |
| Timeline |
| Nike Inc |
| On Holding |
Nike and On Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and On Holding
The main advantage of trading using opposite Nike and On Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, On Holding 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 On Holding will offset losses from the drop in On Holding's long position.The idea behind Nike Inc and On 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.| On Holding vs. Crocs Inc | On Holding vs. Skechers USA | On Holding vs. Nike Inc | On Holding vs. Designer Brands |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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