Correlation Between Nordstrom and Marks

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

By analyzing existing cross correlation between Nordstrom and Marks and Spencer, you can compare the effects of market volatilities on Nordstrom and Marks 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 Marks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordstrom and Marks.

Diversification Opportunities for Nordstrom and Marks

0.21

Correlation Coefficient

Nordstrom  Marks

Modest diversification

The 3 months correlation between Nordstrom and Marks is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nordstrom and Marks and Spencer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marks and Spencer 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 Marks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marks and Spencer has no effect on the direction of Nordstrom i.e., Nordstrom and Marks go up and down completely randomly.

Pair Corralation between Nordstrom and Marks

Considering the 90-day investment horizon Nordstrom is expected to generate 1.84 times less return on investment than Marks. But when comparing it to its historical volatility, Nordstrom is 1.72 times less risky than Marks. It trades about 0.04 of its potential returns per unit of risk. Marks and Spencer is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  386.00  in Marks and Spencer on August 26, 2024 and sell it today you would earn a total of  59.00  from holding Marks and Spencer or generate 15.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nordstrom  vs.  Marks and Spencer

Nordstrom

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordstrom are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Nordstrom may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Marks and Spencer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marks and Spencer has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Marks is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nordstrom and Marks

The main advantage of trading using opposite Nordstrom and Marks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nordstrom position performs unexpectedly, Marks 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 Marks will offset losses from the drop in Marks' long position.

The idea behind Nordstrom and Marks and Spencer 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.