Pair Trading: Adidas & Nike

By November 2021 both Adidas and Nike began a strong correction in share prices. By September 2022, the drop was around 50% for both stock. However, a divergence surged, only Nike begins to recover. Adidas continues to fall, reaching a 72% decline from its peak. This divergence coincides with an interview given by Kanye West to Bloomberg, where he states that he intends to go on its own with Yeezy and end various partnerships. He explicitly states:
"No more companies standing in between me and the audience."

Both these companies base their marketing strategies on bold and impactful campaigns and on partnerships with prominent athletes, clubs, federations, national teams, as well as designers and influencers. The potential for a partnership to be withdrawn or for an unexpected action to result in potential disassociation from a specific figure and the risk that it carries should be considered in every stock with this business practices even if the event didn’t happen to a specific company. Although it is not possible to predict when it will happen, it is certain that, over time, it can happen to any company in this industry. Therefore, despite the initial impact, the market will continue to observe the companies' results and potential, and over time, ratios, metrics, and especially outcomes, will eventually outweigh this immediate hiccup in performance. Since September 2022 to date (April 25th 2024) Adidas went up by 113% while Nike is flat at +1%.