Correlation Between Nike and Continental

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

Diversification Opportunities for Nike and Continental

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nike and Continental is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Caleres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental 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 Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental has no effect on the direction of Nike i.e., Nike and Continental go up and down completely randomly.

Pair Corralation between Nike and Continental

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Continental. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.94 times less risky than Continental. The stock trades about -0.02 of its potential returns per unit of risk. The Caleres is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,015  in Caleres on July 1, 2022 and sell it today you would earn a total of  1,431  from holding Caleres or generate 140.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Nike Inc  vs.  Caleres

 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

Continental 
Continental Performance
0 of 100
Over the last 90 days Caleres has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Continental is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Continental Price Channel

Nike and Continental Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Continental

The main advantage of trading using opposite Nike and Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Continental 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 Continental will offset losses from the drop in Continental's long position.
Nike vs. Amazon Inc
The idea behind Nike Inc and Caleres 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.
Continental 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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