Correlation Between Under Armour and Nike

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

Diversification Opportunities for Under Armour and Nike

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Under and Nike is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour Inc and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Under Armour 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 Under Armour 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 Under Armour i.e., Under Armour and Nike go up and down completely randomly.

Pair Corralation between Under Armour and Nike

Allowing for the 90-day total investment horizon Under Armour is expected to generate 1.18 times less return on investment than Nike. In addition to that, Under Armour is 1.53 times more volatile than Nike Inc. It trades about 0.01 of its total potential returns per unit of risk. Nike Inc is currently generating about 0.02 per unit of volatility. If you would invest  10,522  in Nike Inc on May 10, 2022 and sell it today you would earn a total of  865.00  from holding Nike Inc or generate 8.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Under Armour Inc  vs.  Nike Inc

 Performance (%) 
       Timeline  
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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Under Price Channel

Nike Inc 
Nike Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Nike Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, Nike may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Nike Price Channel

Under Armour and Nike Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Under Armour and Nike

The main advantage of trading using opposite Under Armour and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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 Under Armour 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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