Correlation Between Nike and Western Sierra
Can any of the company-specific risk be diversified away by investing in both Nike and Western Sierra 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 Western Sierra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Western Sierra Mining, you can compare the effects of market volatilities on Nike and Western Sierra 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 Western Sierra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Western Sierra.
Diversification Opportunities for Nike and Western Sierra
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nike and Western is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Western Sierra Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Sierra Mining 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 Western Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Sierra Mining has no effect on the direction of Nike i.e., Nike and Western Sierra go up and down completely randomly.
Pair Corralation between Nike and Western Sierra
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Western Sierra. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 52.56 times less risky than Western Sierra. The stock trades about -0.02 of its potential returns per unit of risk. The Western Sierra Mining is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8.45 in Western Sierra Mining on September 2, 2024 and sell it today you would lose (7.77) from holding Western Sierra Mining or give up 91.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Nike Inc vs. Western Sierra Mining
Performance |
| Timeline |
| Nike Inc |
| Western Sierra Mining |
Nike and Western Sierra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Western Sierra
The main advantage of trading using opposite Nike and Western Sierra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Western Sierra 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 Western Sierra will offset losses from the drop in Western Sierra's long position.The idea behind Nike Inc and Western Sierra Mining 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.| Western Sierra vs. Holloman Energy Corp | Western Sierra vs. cbdMD Inc | Western Sierra vs. Evolus Inc | Western Sierra vs. CV Sciences |
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 Stocks Directory module to find actively traded stocks across global markets.
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