Correlation Between Nike and Newell Brands

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

Diversification Opportunities for Nike and Newell Brands

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Nike and Newell is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Newell Brands Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newell Brands 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 Newell Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newell Brands has no effect on the direction of Nike i.e., Nike and Newell Brands go up and down completely randomly.

Pair Corralation between Nike and Newell Brands

Considering the 90-day investment horizon Nike Inc is expected to generate 1.29 times more return on investment than Newell Brands. However, Nike is 1.29 times more volatile than Newell Brands. It trades about -0.08 of its potential returns per unit of risk. Newell Brands is currently generating about -0.2 per unit of risk. If you would invest  10,793  in Nike Inc on July 8, 2022 and sell it today you would lose (1,683)  from holding Nike Inc or give up 15.59% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Nike Inc  vs.  Newell Brands Inc

 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

Newell Brands 
Newell Performance
0 of 100
Over the last 90 days Newell Brands 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.

Newell Price Channel

Nike and Newell Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Newell Brands

The main advantage of trading using opposite Nike and Newell Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Newell Brands 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 Newell Brands will offset losses from the drop in Newell Brands' long position.
Nike vs. Amazon Inc
The idea behind Nike Inc and Newell Brands 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.
Newell Brands 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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