Correlation Between Nike and Advanced Micro

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

Diversification Opportunities for Nike and Advanced Micro

-0.51
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Nike and Advanced is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of Nike i.e., Nike and Advanced Micro go up and down completely randomly.

Pair Corralation between Nike and Advanced Micro

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Advanced Micro. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.73 times less risky than Advanced Micro. The stock trades about -0.24 of its potential returns per unit of risk. The Advanced Micro Devices is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  17,654  in Advanced Micro Devices on December 30, 2023 and sell it today you would earn a total of  395.00  from holding Advanced Micro Devices or generate 2.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Nike Inc  vs.  Advanced Micro Devices

 Performance 
       Timeline  
Nike Inc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Nike Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Advanced Micro Devices 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Micro Devices are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, Advanced Micro exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nike and Advanced Micro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nike and Advanced Micro

The main advantage of trading using opposite Nike and Advanced Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Advanced Micro 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 Advanced Micro will offset losses from the drop in Advanced Micro's long position.
The idea behind Nike Inc and Advanced Micro Devices 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 the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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