Correlation Between Snap On and Nike

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Can any of the company-specific risk be diversified away by investing in both Snap On and Nike 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 Snap On and Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap On and Nike Inc, you can compare the effects of market volatilities on Snap On and Nike 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 Snap On with a short position of Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap On and Nike.

Diversification Opportunities for Snap On and Nike

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Snap and Nike is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Snap On and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Snap On 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 Snap On are associated (or correlated) with Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Snap On i.e., Snap On and Nike go up and down completely randomly.

Pair Corralation between Snap On and Nike

Considering the 90-day investment horizon Snap On is expected to under-perform the Nike. But the stock apears to be less risky and, when comparing its historical volatility, Snap On is 2.01 times less risky than Nike. The stock trades about -0.06 of its potential returns per unit of risk. The Nike Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,621  in Nike Inc on September 12, 2024 and sell it today you would earn a total of  248.00  from holding Nike Inc or generate 3.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Snap On  vs.  Nike Inc

 Performance 
       Timeline  
Snap On 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Snap On sustained solid returns over the last few months and may actually be approaching a breakup point.
Nike Inc 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Nike is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Snap On and Nike Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Snap On and Nike

The main advantage of trading using opposite Snap On and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap On position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike's long position.
The idea behind Snap On and Nike Inc 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.
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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