Correlation Between Nu Skin and Nike

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

Diversification Opportunities for Nu Skin and Nike

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nu Skin and Nike is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nu Skin Enterprises and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Nu Skin 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 Nu Skin Enterprises are associated (or correlated) with Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Nu Skin i.e., Nu Skin and Nike go up and down completely randomly.

Pair Corralation between Nu Skin and Nike

Considering the 90-day investment horizon Nu Skin is expected to generate 1.54 times less return on investment than Nike. But when comparing it to its historical volatility, Nu Skin Enterprises is 1.35 times less risky than Nike. It trades about 0.05 of its potential returns per unit of risk. Nike Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  10,836  in Nike Inc on May 21, 2022 and sell it today you would earn a total of  765.00  from holding Nike Inc or generate 7.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Nu Skin Enterprises  vs.  Nike Inc

 Performance (%) 
       Timeline  
Nu Skin Enterprises 
Nu Skin Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nu Skin Enterprises are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nu Skin is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Nu Skin Price Channel

Nike Inc 
Nike Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward-looking signals, Nike may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Nike Price Channel

Nu Skin and Nike Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nu Skin and Nike

The main advantage of trading using opposite Nu Skin and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nu Skin position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike's long position.
The idea behind Nu Skin Enterprises and Nike Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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