Correlation Between Microsoft Corp and Nike

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

Diversification Opportunities for Microsoft Corp and Nike

0.74
  Correlation Coefficient

Poor diversification

The 24 months correlation between Microsoft and Nike is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Microsoft Corp 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 Microsoft Corp 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 Microsoft Corp i.e., Microsoft Corp and Nike go up and down completely randomly.

Pair Corralation between Microsoft Corp and Nike

Given the investment horizon of 90 days Microsoft Corp is expected to generate 0.82 times more return on investment than Nike. However, Microsoft Corp is 1.23 times less risky than Nike. It trades about -0.03 of its potential returns per unit of risk. Nike Inc is currently generating about -0.08 per unit of risk. If you would invest  27,187  in Microsoft Corp on March 29, 2022 and sell it today you would lose (417.00)  from holding Microsoft Corp or give up 1.53% of portfolio value over 90 days.
Time Period24 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Nike Inc

 Performance (%) 
      Timeline 
Microsoft Corp 
Microsoft Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0096
Payout Ratio
0.26
Last Split Factor
2:1
Forward Annual Dividend Rate
2.48
Dividend Date
2022-06-09
Ex Dividend Date
2022-08-17
Last Split Date
2003-02-18

Microsoft Price Channel

Nike Inc 
Nike Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 2 (%) 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.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0108
Payout Ratio
0.31
Last Split Factor
2:1
Forward Annual Dividend Rate
1.22
Dividend Date
2022-07-01
Ex Dividend Date
2022-06-03
Last Split Date
2015-12-24

Nike Price Channel

Microsoft Corp and Nike Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Microsoft Corp and Nike

The main advantage of trading using opposite Microsoft Corp and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp 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 Microsoft Corp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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