Correlation Between Visa and Nike

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

Diversification Opportunities for Visa and Nike

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Visa and Nike is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Visa Inc and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc and Visa 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 Visa Inc 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 Visa i.e., Visa and Nike go up and down completely randomly.

Pair Corralation between Visa and Nike

Taking into account the 90-day investment horizon Visa Inc is expected to generate 0.72 times more return on investment than Nike. However, Visa Inc is 1.38 times less risky than Nike. It trades about -0.12 of its potential returns per unit of risk. Nike Inc is currently generating about -0.2 per unit of risk. If you would invest  21,217  in Visa Inc on March 31, 2022 and sell it today you would lose (1,267)  from holding Visa Inc or give up 5.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Visa Inc  vs.  Nike Inc

 Performance (%) 
      Timeline 
Visa Inc 
Visa Performance
0 of 100
Over the last 90 days Visa Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest sluggish performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0079
Payout Ratio
0.22
Last Split Factor
4:1
Forward Annual Dividend Rate
1.5
Dividend Date
2022-06-01
Ex Dividend Date
2022-05-12
Last Split Date
2015-03-19

Visa 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 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
0.0119
Payout Ratio
0.25
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

Visa and Nike Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Visa and Nike

The main advantage of trading using opposite Visa and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Inc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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