Correlation Between The9 and Nike

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Can any of the company-specific risk be diversified away by investing in both The9 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 The9 and Nike into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The9 Ltd ADR and Nike Inc, you can compare the effects of market volatilities on The9 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 The9 with a short position of Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of The9 and Nike.

Diversification Opportunities for The9 and Nike

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between The9 and Nike is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding The9 Ltd ADR and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and The9 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 The9 Ltd ADR 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 The9 i.e., The9 and Nike go up and down completely randomly.

Pair Corralation between The9 and Nike

Given the investment horizon of 90 days The9 Ltd ADR is expected to generate 1.31 times more return on investment than Nike. However, The9 is 1.31 times more volatile than Nike Inc. It trades about -0.19 of its potential returns per unit of risk. Nike Inc is currently generating about -0.3 per unit of risk. If you would invest  122.00  in The9 Ltd ADR on July 3, 2022 and sell it today you would lose (24.00)  from holding The9 Ltd ADR or give up 19.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

The9 Ltd ADR  vs.  Nike Inc

 Performance (%) 
       Timeline  
The9 Ltd ADR 
The9 Performance
0 of 100
Over the last 90 days The9 Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

The9 Price Channel

Nike Inc 
Nike Performance
0 of 100
Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nike Price Channel

The9 and Nike Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with The9 and Nike

The main advantage of trading using opposite The9 and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The9 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.
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The idea behind The9 Ltd ADR 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.
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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