Correlation Between Align Technology and Nordstrom
Can any of the company-specific risk be diversified away by investing in both Align Technology and Nordstrom 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 Align Technology and Nordstrom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Align Technology and Nordstrom, you can compare the effects of market volatilities on Align Technology and Nordstrom 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 Align Technology with a short position of Nordstrom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Align Technology and Nordstrom.
Diversification Opportunities for Align Technology and Nordstrom
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Align and Nordstrom is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Align Technology and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Align Technology 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 Align Technology are associated (or correlated) with Nordstrom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordstrom has no effect on the direction of Align Technology i.e., Align Technology and Nordstrom go up and down completely randomly.
Pair Corralation between Align Technology and Nordstrom
Assuming the 90 days trading horizon Align Technology is expected to generate 17.02 times less return on investment than Nordstrom. But when comparing it to its historical volatility, Align Technology is 1.28 times less risky than Nordstrom. It trades about 0.01 of its potential returns per unit of risk. Nordstrom is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 8,726 in Nordstrom on September 3, 2024 and sell it today you would earn a total of 5,378 from holding Nordstrom or generate 61.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 66.13% |
| Values | Daily Returns |
Align Technology vs. Nordstrom
Performance |
| Timeline |
| Align Technology |
| Nordstrom |
Align Technology and Nordstrom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Align Technology and Nordstrom
The main advantage of trading using opposite Align Technology and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Align Technology position performs unexpectedly, Nordstrom 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 Nordstrom will offset losses from the drop in Nordstrom's long position.| Align Technology vs. Abbott Laboratories | Align Technology vs. Fundo Investimento Imobiliario | Align Technology vs. Fras le SA | Align Technology vs. Western Digital |
| Nordstrom vs. Align Technology | Nordstrom vs. Marvell Technology | Nordstrom vs. Bio Techne | Nordstrom vs. Uber Technologies |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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