Correlation Between Nike and Adobe Systems

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

Diversification Opportunities for Nike and Adobe Systems

0.95
  Correlation Coefficient

Almost no diversification

The 12 months correlation between Nike and Adobe is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Adobe Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Systems and Nike 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 Nike Inc are associated (or correlated) with Adobe Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Systems has no effect on the direction of Nike i.e., Nike and Adobe Systems go up and down completely randomly.

Pair Corralation between Nike and Adobe Systems

Considering the 90-day investment horizon Nike Inc is expected to generate 0.53 times more return on investment than Adobe Systems. However, Nike Inc is 1.9 times less risky than Adobe Systems. It trades about -0.23 of its potential returns per unit of risk. Adobe Systems is currently generating about -0.32 per unit of risk. If you would invest  10,788  in Nike Inc on June 28, 2022 and sell it today you would lose (1,098)  from holding Nike Inc or give up 10.18% of portfolio value over 90 days.
Time Period12 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Nike Inc  vs.  Adobe Systems

 Performance (%) 
       Timeline  
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 latest weak performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Nike Price Channel

Adobe Systems 
Adobe Performance
0 of 100
Over the last 90 days Adobe Systems 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 fundamental drivers remain rather sound which may send shares a bit higher in October 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Adobe Price Channel

Nike and Adobe Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Adobe Systems

The main advantage of trading using opposite Nike and Adobe Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Adobe Systems 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 Adobe Systems will offset losses from the drop in Adobe Systems' long position.
Nike vs. Kibush Capital Corp
The idea behind Nike Inc and Adobe Systems 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.
Adobe Systems vs. Kibush Capital Corp
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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