Correlation Between Nordstrom and SM Investments
Can any of the company-specific risk be diversified away by investing in both Nordstrom and SM Investments 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 Nordstrom and SM Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nordstrom and SM Investments, you can compare the effects of market volatilities on Nordstrom and SM Investments 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 Nordstrom with a short position of SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordstrom and SM Investments.
Diversification Opportunities for Nordstrom and SM Investments
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nordstrom and SVTMF is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nordstrom and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments and Nordstrom 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 Nordstrom are associated (or correlated) with SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of Nordstrom i.e., Nordstrom and SM Investments go up and down completely randomly.
Pair Corralation between Nordstrom and SM Investments
Considering the 90-day investment horizon Nordstrom is expected to generate 1.99 times more return on investment than SM Investments. However, Nordstrom is 1.99 times more volatile than SM Investments. It trades about -0.06 of its potential returns per unit of risk. SM Investments is currently generating about -0.21 per unit of risk. If you would invest 2,364 in Nordstrom on August 30, 2024 and sell it today you would lose (102.00) from holding Nordstrom or give up 4.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nordstrom vs. SM Investments
Performance |
| Timeline |
| Nordstrom |
| SM Investments |
Nordstrom and SM Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nordstrom and SM Investments
The main advantage of trading using opposite Nordstrom and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordstrom position performs unexpectedly, SM Investments 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 SM Investments will offset losses from the drop in SM Investments' long position.| Nordstrom vs. Kohls Corp | Nordstrom vs. Dillards | Nordstrom vs. Marks Spencer Group | Nordstrom vs. Marks and Spencer |
| SM Investments vs. Nordstrom | SM Investments vs. Macys Inc | SM Investments vs. Dillards Capital Trust | SM Investments vs. Kohls Corp |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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