Correlation Between Western Sierra and Nike
Can any of the company-specific risk be diversified away by investing in both Western Sierra 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 Western Sierra and Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Sierra Mining and Nike Inc, you can compare the effects of market volatilities on Western Sierra 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 Western Sierra with a short position of Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Sierra and Nike.
Diversification Opportunities for Western Sierra and Nike
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Nike is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Western Sierra Mining and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Western Sierra 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 Western Sierra Mining 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 Western Sierra i.e., Western Sierra and Nike go up and down completely randomly.
Pair Corralation between Western Sierra and Nike
Given the investment horizon of 90 days Western Sierra Mining is expected to generate 52.56 times more return on investment than Nike. However, Western Sierra is 52.56 times more volatile than Nike Inc. It trades about 0.1 of its potential returns per unit of risk. Nike Inc is currently generating about -0.02 per unit of risk. 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 |
Western Sierra Mining vs. Nike Inc
Performance |
| Timeline |
| Western Sierra Mining |
| Nike Inc |
Western Sierra and Nike Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Sierra and Nike
The main advantage of trading using opposite Western Sierra and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Sierra 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.| 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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