Correlation Between Nike and Arrival

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

Diversification Opportunities for Nike and Arrival

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nike and Arrival is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Arrival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrival 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 Arrival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrival has no effect on the direction of Nike i.e., Nike and Arrival go up and down completely randomly.

Pair Corralation between Nike and Arrival

Considering the 90-day investment horizon Nike Inc is expected to generate 0.43 times more return on investment than Arrival. However, Nike Inc is 2.33 times less risky than Arrival. It trades about -0.08 of its potential returns per unit of risk. Arrival is currently generating about -0.14 per unit of risk. If you would invest  12,815  in Nike Inc on July 7, 2022 and sell it today you would lose (3,705)  from holding Nike Inc or give up 28.91% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Nike Inc  vs.  Arrival

 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

Arrival 
Arrival Performance
0 of 100
Over the last 90 days Arrival has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in November 2022. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Arrival Price Channel

Nike and Arrival Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Arrival

The main advantage of trading using opposite Nike and Arrival positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Arrival 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 Arrival will offset losses from the drop in Arrival's long position.
Nike vs. Amazon Inc
The idea behind Nike Inc and Arrival 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.
Arrival vs. Amazon Inc
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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