Correlation Between Nike and Sturm Ruger

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

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

Diversification Opportunities for Nike and Sturm Ruger

-0.78

Correlation Coefficient

Nike  Sturm Ruger

Pay attention - limited upside

The 3 months correlation between Nike and Sturm is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Sturm Ruger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sturm Ruger 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 Sturm Ruger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sturm Ruger has no effect on the direction of Nike i.e., Nike and Sturm Ruger go up and down completely randomly.

Pair Corralation between Nike and Sturm Ruger

Considering the 90-day investment horizon Nike Inc is expected to under-perform the Sturm Ruger. In addition to that, Nike is 1.5 times more volatile than Sturm Ruger. It trades about -0.1 of its total potential returns per unit of risk. Sturm Ruger is currently generating about 0.21 per unit of volatility. If you would invest  4,267  in Sturm Ruger on February 2, 2024 and sell it today you would earn a total of  418.00  from holding Sturm Ruger or generate 9.8% return on investment over 90 days.

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

Nike Inc  vs.  Sturm Ruger

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 conflicting 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.

Sturm Ruger

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sturm Ruger are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Sturm Ruger may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Nike and Sturm Ruger

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

The idea behind Nike Inc and Sturm Ruger 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.