Correlation Between Nike and Vera Bradley
Can any of the company-specific risk be diversified away by investing in both Nike and Vera Bradley 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 Vera Bradley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Vera Bradley, you can compare the effects of market volatilities on Nike and Vera Bradley 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 Vera Bradley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Vera Bradley.
Diversification Opportunities for Nike and Vera Bradley
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nike and Vera is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Vera Bradley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vera Bradley 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 Vera Bradley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vera Bradley has no effect on the direction of Nike i.e., Nike and Vera Bradley go up and down completely randomly.
Pair Corralation between Nike and Vera Bradley
Considering the 90-day investment horizon Nike Inc is expected to generate 0.81 times more return on investment than Vera Bradley. However, Nike Inc is 1.23 times less risky than Vera Bradley. It trades about -0.03 of its potential returns per unit of risk. Vera Bradley is currently generating about -0.03 per unit of risk. If you would invest 9,257 in Nike Inc on September 3, 2024 and sell it today you would lose (1,380) from holding Nike Inc or give up 14.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Vera Bradley
Performance |
| Timeline |
| Nike Inc |
| Vera Bradley |
Nike and Vera Bradley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Vera Bradley
The main advantage of trading using opposite Nike and Vera Bradley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Vera Bradley 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 Vera Bradley will offset losses from the drop in Vera Bradley's long position.The idea behind Nike Inc and Vera Bradley 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.| Vera Bradley vs. Rocky Brands | Vera Bradley vs. Steven Madden | Vera Bradley vs. Wolverine World Wide | Vera Bradley vs. Caleres |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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