Correlation Between Nike and Alger Weatherbie

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

Diversification Opportunities for Nike and Alger Weatherbie

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nike and Alger is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Alger Weatherbie Enduring in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Weatherbie Enduring 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 Alger Weatherbie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Weatherbie Enduring has no effect on the direction of Nike i.e., Nike and Alger Weatherbie go up and down completely randomly.

Pair Corralation between Nike and Alger Weatherbie

Considering the 90-day investment horizon Nike Inc is expected to generate 0.97 times more return on investment than Alger Weatherbie. However, Nike Inc is 1.03 times less risky than Alger Weatherbie. It trades about -0.02 of its potential returns per unit of risk. Alger Weatherbie Enduring is currently generating about -0.08 per unit of risk. If you would invest  12,848  in Nike Inc on June 30, 2022 and sell it today you would lose (3,098)  from holding Nike Inc or give up 24.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy39.24%
ValuesDaily Returns

Nike Inc  vs.  Alger Weatherbie Enduring

 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 rather sound forward-looking signals, Nike is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Nike Price Channel

Alger Weatherbie Enduring 
Alger Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alger Weatherbie Enduring are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alger Weatherbie is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alger Price Channel

Nike and Alger Weatherbie Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Alger Weatherbie

The main advantage of trading using opposite Nike and Alger Weatherbie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Alger Weatherbie 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 Alger Weatherbie will offset losses from the drop in Alger Weatherbie's long position.
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The idea behind Nike Inc and Alger Weatherbie Enduring 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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