Correlation Between Tandem Diabetes and Nike
Can any of the company-specific risk be diversified away by investing in both Tandem Diabetes 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 Tandem Diabetes and Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tandem Diabetes Care and Nike Inc, you can compare the effects of market volatilities on Tandem Diabetes 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 Tandem Diabetes with a short position of Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tandem Diabetes and Nike.
Diversification Opportunities for Tandem Diabetes and Nike
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tandem and Nike is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Tandem Diabetes 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 Tandem Diabetes Care 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 Tandem Diabetes i.e., Tandem Diabetes and Nike go up and down completely randomly.
Pair Corralation between Tandem Diabetes and Nike
Given the investment horizon of 90 days Tandem Diabetes Care is expected to under-perform the Nike. In addition to that, Tandem Diabetes is 1.6 times more volatile than Nike Inc. It trades about -0.05 of its total potential returns per unit of risk. Nike Inc is currently generating about -0.03 per unit of volatility. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tandem Diabetes Care vs. Nike Inc
Performance |
| Timeline |
| Tandem Diabetes Care |
| Nike Inc |
Tandem Diabetes and Nike Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tandem Diabetes and Nike
The main advantage of trading using opposite Tandem Diabetes and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tandem Diabetes 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.| Tandem Diabetes vs. DexCom Inc | Tandem Diabetes vs. Inspire Medical Systems | Tandem Diabetes vs. Penumbra | Tandem Diabetes vs. Insulet |
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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