Correlation Between Nike and Steven Madden
Can any of the company-specific risk be diversified away by investing in both Nike and Steven Madden 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 Steven Madden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Steven Madden, you can compare the effects of market volatilities on Nike and Steven Madden 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 Steven Madden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Steven Madden.
Diversification Opportunities for Nike and Steven Madden
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nike and Steven is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Nike i.e., Nike and Steven Madden go up and down completely randomly.
Pair Corralation between Nike and Steven Madden
Considering the 90-day investment horizon Nike Inc is expected to generate 0.89 times more return on investment than Steven Madden. However, Nike Inc is 1.12 times less risky than Steven Madden. It trades about 0.02 of its potential returns per unit of risk. Steven Madden is currently generating about -0.02 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. Steven Madden
Performance |
| Timeline |
| Nike Inc |
| Steven Madden |
Nike and Steven Madden Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Steven Madden
The main advantage of trading using opposite Nike and Steven Madden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Steven Madden 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 Steven Madden will offset losses from the drop in Steven Madden's long position.The idea behind Nike Inc and Steven Madden 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.| Steven Madden vs. Weyco Group | Steven Madden vs. Caleres | Steven Madden vs. Rocky Brands | Steven Madden 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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