Correlation Between Nike and United States
Can any of the company-specific risk be diversified away by investing in both Nike and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and United States Steel, you can compare the effects of market volatilities on Nike and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and United States.
Diversification Opportunities for Nike and United States
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nike and United is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Nike i.e., Nike and United States go up and down completely randomly.
Pair Corralation between Nike and United States
Considering the 90-day investment horizon Nike Inc is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.2 times less risky than United States. The stock trades about -0.07 of its potential returns per unit of risk. The United States Steel is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 4,935 in United States Steel on September 12, 2024 and sell it today you would lose (1,496) from holding United States Steel or give up 30.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. United States Steel
Performance |
| Timeline |
| Nike Inc |
| United States Steel |
Nike and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and United States
The main advantage of trading using opposite Nike and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.The idea behind Nike Inc and United States Steel 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.| United States vs. Nucor Corp | United States vs. Steel Dynamics | United States vs. ArcelorMittal SA ADR | United States vs. Gerdau SA ADR |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |