Correlation Between Baidu and Nordstrom
Can any of the company-specific risk be diversified away by investing in both Baidu 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 Baidu and Nordstrom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baidu Inc and Nordstrom, you can compare the effects of market volatilities on Baidu 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 Baidu with a short position of Nordstrom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baidu and Nordstrom.
Diversification Opportunities for Baidu and Nordstrom
Excellent diversification
The 3 months correlation between Baidu and Nordstrom is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Baidu Inc and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Baidu 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 Baidu Inc 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 Baidu i.e., Baidu and Nordstrom go up and down completely randomly.
Pair Corralation between Baidu and Nordstrom
Given the investment horizon of 90 days Baidu is expected to generate 1.05 times less return on investment than Nordstrom. But when comparing it to its historical volatility, Baidu Inc is 1.09 times less risky than Nordstrom. It trades about 0.07 of its potential returns per unit of risk. Nordstrom is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,212 in Nordstrom on September 19, 2024 and sell it today you would earn a total of 77.00 from holding Nordstrom or generate 3.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baidu Inc vs. Nordstrom
Performance |
| Timeline |
| Baidu Inc |
| Nordstrom |
Baidu and Nordstrom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baidu and Nordstrom
The main advantage of trading using opposite Baidu and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baidu 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.| Baidu vs. Tencent Music Entertainment | Baidu vs. Twilio Inc | Baidu vs. Spotify Technology SA | Baidu vs. Weibo Corp |
| Nordstrom vs. Twilio Inc | Nordstrom vs. Getty Images Holdings | Nordstrom vs. Baidu Inc | Nordstrom vs. Snap Inc |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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