Correlation Between Nike and Under Armour

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

Diversification Opportunities for Nike and Under Armour

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Nike and Under is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Under Armour Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Under Armour 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 Under Armour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Under Armour has no effect on the direction of Nike i.e., Nike and Under Armour go up and down completely randomly.

Pair Corralation between Nike and Under Armour

Considering the 90-day investment horizon Nike Inc is expected to generate 0.84 times more return on investment than Under Armour. However, Nike Inc is 1.19 times less risky than Under Armour. It trades about 0.02 of its potential returns per unit of risk. Under Armour is currently generating about -0.11 per unit of risk. If you would invest  11,266  in Nike Inc on March 27, 2022 and sell it today you would earn a total of  25.00  from holding Nike Inc or generate 0.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Nike Inc  vs.  Under Armour 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 weak performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in July 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0113
Payout Ratio
0.31
Last Split Factor
2:1
Forward Annual Dividend Rate
1.22
Dividend Date
2022-07-01
Ex Dividend Date
2022-06-03
Last Split Date
2015-12-24

Nike Price Channel

Under Armour 
Under Performance
0 of 100
Over the last 90 days Under Armour has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Structure and Payout Changes

Last Split Factor
1:1
Last Split Date
2016-06-13

Under Price Channel

Nike and Under Armour Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Nike and Under Armour

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