Correlation Between Nike and Southland Holdings
Can any of the company-specific risk be diversified away by investing in both Nike and Southland 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 Southland 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 Southland Holdings, you can compare the effects of market volatilities on Nike and Southland 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 Southland Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Southland Holdings.
Diversification Opportunities for Nike and Southland Holdings
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nike and Southland is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Southland Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southland 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 Southland Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southland Holdings has no effect on the direction of Nike i.e., Nike and Southland Holdings go up and down completely randomly.
Pair Corralation between Nike and Southland Holdings
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Southland Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.99 times less risky than Southland Holdings. The stock trades about -0.06 of its potential returns per unit of risk. The Southland Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 506.00 in Southland Holdings on September 4, 2024 and sell it today you would lose (201.00) from holding Southland Holdings or give up 39.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Southland Holdings
Performance |
| Timeline |
| Nike Inc |
| Southland Holdings |
Nike and Southland Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Southland Holdings
The main advantage of trading using opposite Nike and Southland Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Southland 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 Southland Holdings will offset losses from the drop in Southland Holdings' long position.The idea behind Nike Inc and Southland 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.| Southland Holdings vs. Elmos Semiconductor SE | Southland Holdings vs. Freedom Internet Group | Southland Holdings vs. Casio Computer Co | Southland Holdings vs. Globalfoundries |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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