Correlation Between Nike and Kibush Capital

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

Diversification Opportunities for Nike and Kibush Capital

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Nike and Kibush is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Kibush Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kibush Capital Corp 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 Kibush Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kibush Capital Corp has no effect on the direction of Nike i.e., Nike and Kibush Capital go up and down completely randomly.

Pair Corralation between Nike and Kibush Capital

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Kibush Capital. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 6.32 times less risky than Kibush Capital. The stock trades about -0.01 of its potential returns per unit of risk. The Kibush Capital Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.16  in Kibush Capital Corp on August 29, 2022 and sell it today you would lose (0.13)  from holding Kibush Capital Corp or give up 81.25% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Nike Inc  vs.  Kibush Capital Corp

 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Nike Price Channel

Kibush Capital Corp 
Kibush Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Kibush Capital Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental indicators, Kibush Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Kibush Price Channel

Nike and Kibush Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Kibush Capital

The main advantage of trading using opposite Nike and Kibush Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Kibush Capital 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 Kibush Capital will offset losses from the drop in Kibush Capital's long position.
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The idea behind Nike Inc and Kibush Capital Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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