Correlation Between Nike and Astec Industries

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

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

Diversification Opportunities for Nike and Astec Industries

-0.83

Correlation Coefficient

Nike  Astec Industries

Pay attention - limited upside

The 3 months correlation between Nike and Astec is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Astec Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astec Industries 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 Astec Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astec Industries has no effect on the direction of Nike i.e., Nike and Astec Industries go up and down completely randomly.

Pair Corralation between Nike and Astec Industries

Considering the 90-day investment horizon Nike is expected to generate 5.32 times less return on investment than Astec Industries. But when comparing it to its historical volatility, Nike Inc is 1.06 times less risky than Astec Industries. It trades about 0.02 of its potential returns per unit of risk. Astec Industries is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,211  in Astec Industries on January 25, 2024 and sell it today you would earn a total of  99.00  from holding Astec Industries or generate 2.35% return on investment over 90 days.

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

Nike Inc  vs.  Astec Industries

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 rather sound forward-looking signals, Nike is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Astec Industries

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Nike and Astec Industries

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

The idea behind Nike Inc and Astec Industries 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..