Correlation Between Nike and Organto Foods

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

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

Diversification Opportunities for Nike and Organto Foods

0.11

Correlation Coefficient

Nike  Organto Foods

Average diversification

The 3 months correlation between Nike and Organto is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Organto Foods Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Organto Foods 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 Organto Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Organto Foods has no effect on the direction of Nike i.e., Nike and Organto Foods go up and down completely randomly.

Pair Corralation between Nike and Organto Foods

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Organto Foods. But the stock apears to be less risky and, when comparing its historical volatility, Nike Inc is 6.01 times less risky than Organto Foods. The stock trades about -0.1 of its potential returns per unit of risk. The Organto Foods Incorporated is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Organto Foods Incorporated on April 7, 2024 and sell it today you would lose (6.50) from holding Organto Foods Incorporated or give up 46.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	73.39%
Values	Daily Returns

Nike Inc  vs.  Organto Foods Incorporated

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 conflicting performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in August 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Organto Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Organto Foods Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in August 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Nike and Organto Foods

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

The idea behind Nike Inc and Organto Foods Incorporated 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.