Correlation Between Elisa Oyj and Nordstrom

Can any of the company-specific risk be diversified away by investing in both Elisa Oyj 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 Elisa Oyj and Nordstrom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elisa Oyj and Nordstrom, you can compare the effects of market volatilities on Elisa Oyj 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 Elisa Oyj with a short position of Nordstrom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elisa Oyj and Nordstrom.

Diversification Opportunities for Elisa Oyj and Nordstrom

0.07

Correlation Coefficient

Elisa Oyj  Nordstrom

Significant diversification

The 1 month correlation between Elisa and Nordstrom is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Elisa Oyj and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Elisa Oyj 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 Elisa Oyj 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 Elisa Oyj i.e., Elisa Oyj and Nordstrom go up and down completely randomly.

Pair Corralation between Elisa Oyj and Nordstrom

Assuming the 90 days horizon Elisa Oyj is expected to generate 1.81 times less return on investment than Nordstrom. But when comparing it to its historical volatility, Elisa Oyj is 4.29 times less risky than Nordstrom. It trades about 0.31 of its potential returns per unit of risk. Nordstrom is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,866  in Nordstrom on February 5, 2024 and sell it today you would earn a total of  144.00  from holding Nordstrom or generate 7.72% return on investment over 90 days.

Time Period	1 Month [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Elisa Oyj  vs.  Nordstrom

Elisa Oyj

Risk-Adjusted Performance

23 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elisa Oyj are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Elisa Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Nordstrom

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordstrom are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Nordstrom displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elisa Oyj and Nordstrom

The main advantage of trading using opposite Elisa Oyj and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elisa Oyj 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.

The idea behind Elisa Oyj and Nordstrom pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.