Correlation Between Nike and Deckers Outdoor
Can any of the company-specific risk be diversified away by investing in both Nike and Deckers Outdoor 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 Deckers Outdoor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Deckers Outdoor, you can compare the effects of market volatilities on Nike and Deckers Outdoor 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 Deckers Outdoor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Deckers Outdoor.
Diversification Opportunities for Nike and Deckers Outdoor
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nike and Deckers is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor 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 Deckers Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deckers Outdoor has no effect on the direction of Nike i.e., Nike and Deckers Outdoor go up and down completely randomly.
Pair Corralation between Nike and Deckers Outdoor
Considering the 90-day investment horizon Nike Inc is expected to under-perform the Deckers Outdoor. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 1.14 times less risky than Deckers Outdoor. The stock trades about -0.01 of its potential returns per unit of risk. The Deckers Outdoor is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 27,908 in Deckers Outdoor on January 24, 2024 and sell it today you would earn a total of 55,035 from holding Deckers Outdoor or generate 197.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Nike Inc vs. Deckers Outdoor
Performance |
| Timeline |
| Nike Inc |
| Deckers Outdoor |
Nike and Deckers Outdoor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Deckers Outdoor
The main advantage of trading using opposite Nike and Deckers Outdoor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike position performs unexpectedly, Deckers Outdoor 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 Deckers Outdoor will offset losses from the drop in Deckers Outdoor's long position.The idea behind Nike Inc and Deckers Outdoor 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.| Deckers Outdoor vs. On Holding | Deckers Outdoor vs. Skechers USA | Deckers Outdoor vs. Nike Inc | Deckers Outdoor vs. Steven Madden |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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