Correlation Between Nike and Tamarack Valley
Can any of the company-specific risk be diversified away by investing in both Nike and Tamarack Valley 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 Tamarack Valley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Tamarack Valley Energy, you can compare the effects of market volatilities on Nike and Tamarack Valley 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 Tamarack Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Tamarack Valley.
Diversification Opportunities for Nike and Tamarack Valley
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nike and Tamarack is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Tamarack Valley Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamarack Valley Energy 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 Tamarack Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamarack Valley Energy has no effect on the direction of Nike i.e., Nike and Tamarack Valley go up and down completely randomly.
Pair Corralation between Nike and Tamarack Valley
Considering the 90-day investment horizon Nike is expected to generate 2.41 times less return on investment than Tamarack Valley. But when comparing it to its historical volatility, Nike Inc is 1.33 times less risky than Tamarack Valley. It trades about 0.07 of its potential returns per unit of risk. Tamarack Valley Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 298.00 in Tamarack Valley Energy on September 1, 2024 and sell it today you would earn a total of 16.00 from holding Tamarack Valley Energy or generate 5.37% 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. Tamarack Valley Energy
Performance |
| Timeline |
| Nike Inc |
| Tamarack Valley Energy |
Nike and Tamarack Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Tamarack Valley
The main advantage of trading using opposite Nike and Tamarack Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Tamarack Valley 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 Tamarack Valley will offset losses from the drop in Tamarack Valley's long position.The idea behind Nike Inc and Tamarack Valley Energy 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.| Tamarack Valley vs. Asure Software | Tamarack Valley vs. NETGEAR | Tamarack Valley vs. Playtech plc | Tamarack Valley vs. Planet Fitness |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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