Correlation Between Nike and VirnetX Holding

Can any of the company-specific risk be diversified away by investing in both Nike and VirnetX Holding 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 VirnetX Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nike Inc and VirnetX Holding Corp, you can compare the effects of market volatilities on Nike and VirnetX Holding 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 VirnetX Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and VirnetX Holding.

Diversification Opportunities for Nike and VirnetX Holding

0.57

Correlation Coefficient

Nike  VirnetX Holding

Very weak diversification

The 3 months correlation between Nike and VirnetX is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and VirnetX Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VirnetX Holding Corp 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 VirnetX Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VirnetX Holding Corp has no effect on the direction of Nike i.e., Nike and VirnetX Holding go up and down completely randomly.

Pair Corralation between Nike and VirnetX Holding

Considering the 90-day investment horizon Nike Inc is expected to generate 0.7 times more return on investment than VirnetX Holding. However, Nike Inc is 1.43 times less risky than VirnetX Holding. It trades about 0.13 of its potential returns per unit of risk. VirnetX Holding Corp is currently generating about -0.44 per unit of risk. If you would invest  9,000  in Nike Inc on February 7, 2024 and sell it today you would earn a total of  336.00  from holding Nike Inc or generate 3.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Nike Inc  vs.  VirnetX Holding Corp

Nike Inc

Risk-Adjusted Performance

0 of 100

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 inconsistent 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.

VirnetX Holding Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VirnetX Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Nike and VirnetX Holding

The main advantage of trading using opposite Nike and VirnetX Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, VirnetX Holding 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 VirnetX Holding will offset losses from the drop in VirnetX Holding's long position.

The idea behind Nike Inc and VirnetX Holding Corp 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..