Correlation Between Nike and Arweave

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

Diversification Opportunities for Nike and Arweave

0.58
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Nike and Arweave is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Arweave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arweave 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 Arweave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arweave has no effect on the direction of Nike i.e., Nike and Arweave go up and down completely randomly.

Pair Corralation between Nike and Arweave

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Arweave. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.31 times less risky than Arweave. The stock trades about -0.19 of its potential returns per unit of risk. The Arweave is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  933.00  in Arweave on July 7, 2022 and sell it today you would earn a total of  32.00  from holding Arweave or generate 3.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Nike Inc  vs.  Arweave

 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 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

Arweave 
Arweave Performance
0 of 100
Over the last 90 days Arweave has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Arweave is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arweave Price Channel

Nike and Arweave Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Arweave

The main advantage of trading using opposite Nike and Arweave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Arweave 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 Arweave will offset losses from the drop in Arweave's long position.
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The idea behind Nike Inc and Arweave 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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