Nike Beta Annalysis

Beta measures a stock's volatility, the degree to which its price fluctuates in relation to the overall market. In other words, it gives a sense of the stock's market risk compared to the greater market. Beta is used also to compare a stock's market risk to that of other stocks. This measure is calculated using regression analysis. A beta of 1 indicates that the security's price tends to move with the market. A beta greater than 1 indicates that the security's price tends to be more volatile than the market, and a beta less than 1 means it tends to be less volatile than the market.

Essentially, beta expresses the fundamental tradeoff between minimizing risk and maximizing return. In this case, Nike’s 10 year beta against the market is 0.751, meaning Nike is relatively less volatile when compared to the S & P 500. If S & P 500 was to increase or decline by 10%, Nike would only increase or decline by 7.5%. We then look at the three year analysis, Nike has a beta of 0.928, meaning Nike as an equity has become more volatile, however when compared to the S & P 500, Nike is still less volatile than the market itself. When Nike is compared to the MSCI, Nike has a beta of 0.667, meaning that Nike is much less volatile than MSCI. The difference between the betas could be caused by the market performance. The S & P 500 has become more volatile in the last few years, which caused the Beta to be different for the 10 and 3 year analysis. And since S & P 500 and MSCI performs differently, Nike’s beta would be different when compared to the different indexes

In conclusion, Nike is a stable stock, although it won’t earn as much in a bull market, it also won’t lose as much in a bear market such as the recession the market experience d recently. Nike could be an ideal stock in a portfolio if a stable return is desired, since it won’t be affected by the market’s volatility as much as the other stocks would be.