Correlation Between Dynamic Energy and Nike

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

Diversification Opportunities for Dynamic Energy and Nike

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between Dynamic and Nike is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Energy Exploration and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Dynamic Energy 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 Dynamic Energy Exploration 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 Dynamic Energy i.e., Dynamic Energy and Nike go up and down completely randomly.

Pair Corralation between Dynamic Energy and Nike

Considering the 90-day investment horizon Dynamic Energy Exploration is expected to under-perform the Nike. In addition to that, Dynamic Energy is 1.35 times more volatile than Nike Inc. It trades about -0.25 of its total potential returns per unit of risk. Nike Inc is currently generating about -0.12 per unit of volatility. If you would invest  11,856  in Nike Inc on March 30, 2022 and sell it today you would lose (806.00)  from holding Nike Inc or give up 6.8% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dynamic Energy Exploration  vs.  Nike Inc

 Performance (%) 
      Timeline 
Dynamic Energy Explo 
Dynamic Performance
0 of 100
Over the last 90 days Dynamic Energy Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Dynamic Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dynamic Price Channel

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 unsteady 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.

Nike Price Channel

Dynamic Energy and Nike Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Dynamic Energy and Nike

The main advantage of trading using opposite Dynamic Energy and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynamic Energy 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.

Dynamic Energy Exploration

Pair trading matchups for Dynamic Energy

The idea behind Dynamic Energy Exploration 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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