Correlation Between Macys and Nordstrom
Can any of the company-specific risk be diversified away by investing in both Macys 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 Macys and Nordstrom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Macys Inc and Nordstrom, you can compare the effects of market volatilities on Macys 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 Macys with a short position of Nordstrom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Nordstrom.
Diversification Opportunities for Macys and Nordstrom
Good diversification
The 3 months correlation between Macys and Nordstrom is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Macys 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 Macys 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 Macys i.e., Macys and Nordstrom go up and down completely randomly.
Pair Corralation between Macys and Nordstrom
Taking into account the 90-day investment horizon Macys Inc is expected to under-perform the Nordstrom. But the stock apears to be less risky and, when comparing its historical volatility, Macys Inc is 1.47 times less risky than Nordstrom. The stock trades about -0.08 of its potential returns per unit of risk. The Nordstrom is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,891 in Nordstrom on January 25, 2024 and sell it today you would earn a total of 35.00 from holding Nordstrom or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Macys Inc vs. Nordstrom
Performance |
| Timeline |
| Macys Inc |
| Nordstrom |
Macys and Nordstrom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Macys and Nordstrom
The main advantage of trading using opposite Macys and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys 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.| Macys vs. Marks Spencer Group | Macys vs. Marks and Spencer | Macys vs. Dillards Capital Trust | Macys vs. Companhia Brasileira de |
| Nordstrom vs. Marks Spencer Group | Nordstrom vs. Marks and Spencer | Nordstrom vs. Dillards Capital Trust | Nordstrom vs. Companhia Brasileira de |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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