Correlation Between Foot Locker and Nordstrom
Can any of the company-specific risk be diversified away by investing in both Foot Locker 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 Foot Locker and Nordstrom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foot Locker and Nordstrom, you can compare the effects of market volatilities on Foot Locker 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 Foot Locker with a short position of Nordstrom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foot Locker and Nordstrom.
Diversification Opportunities for Foot Locker and Nordstrom
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Foot and Nordstrom is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Foot Locker and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Foot Locker 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 Foot Locker 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 Foot Locker i.e., Foot Locker and Nordstrom go up and down completely randomly.
Pair Corralation between Foot Locker and Nordstrom
Allowing for the 90-day total investment horizon Foot Locker is expected to under-perform the Nordstrom. In addition to that, Foot Locker is 1.36 times more volatile than Nordstrom. It trades about -0.12 of its total potential returns per unit of risk. Nordstrom is currently generating about -0.04 per unit of volatility. If you would invest 2,269 in Nordstrom on August 24, 2024 and sell it today you would lose (32.00) from holding Nordstrom or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Foot Locker vs. Nordstrom
Performance |
| Timeline |
| Foot Locker |
| Nordstrom |
Foot Locker and Nordstrom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foot Locker and Nordstrom
The main advantage of trading using opposite Foot Locker and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foot Locker 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.| Foot Locker vs. Ross Stores | Foot Locker vs. Childrens Place | Foot Locker vs. Guess Inc | Foot Locker vs. Cato Corporation |
| Nordstrom vs. Kohls Corp | Nordstrom vs. Dillards | Nordstrom vs. Marks Spencer Group | Nordstrom vs. Marks and Spencer |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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