Correlation Between Nike and Stepstone
Can any of the company-specific risk be diversified away by investing in both Nike and Stepstone 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 Stepstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Stepstone Group, you can compare the effects of market volatilities on Nike and Stepstone 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 Stepstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Stepstone.
Diversification Opportunities for Nike and Stepstone
Very good diversification
The 3 months correlation between Nike and Stepstone is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Nike i.e., Nike and Stepstone go up and down completely randomly.
Pair Corralation between Nike and Stepstone
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Stepstone. In addition to that, Nike is 1.13 times more volatile than Stepstone Group. It trades about -0.04 of its total potential returns per unit of risk. Stepstone Group is currently generating about 0.16 per unit of volatility. If you would invest 4,425 in Stepstone Group on September 1, 2024 and sell it today you would earn a total of 2,164 from holding Stepstone Group or generate 48.9% 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. Stepstone Group
Performance |
| Timeline |
| Nike Inc |
| Stepstone Group |
Nike and Stepstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Stepstone
The main advantage of trading using opposite Nike and Stepstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Stepstone 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 Stepstone will offset losses from the drop in Stepstone's long position.The idea behind Nike Inc and Stepstone Group 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.| Stepstone vs. Visa Class A | Stepstone vs. Diamond Hill Investment | Stepstone vs. Distoken Acquisition | Stepstone vs. Associated Capital Group |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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