Correlation Between Dillards Capital and Nordstrom

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

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

Diversification Opportunities for Dillards Capital and Nordstrom

0.7

Correlation Coefficient

Dillards Capital  Nordstrom

Poor diversification

The 3 months correlation between Dillards and Nordstrom is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Dillards Capital Trust and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Dillards Capital 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 Dillards Capital Trust 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 Dillards Capital i.e., Dillards Capital and Nordstrom go up and down completely randomly.

Pair Corralation between Dillards Capital and Nordstrom

Considering the 90-day investment horizon Dillards Capital is expected to generate 1.23 times less return on investment than Nordstrom. In addition to that, Dillards Capital is 1.8 times more volatile than Nordstrom. It trades about 0.09 of its total potential returns per unit of risk. Nordstrom is currently generating about 0.2 per unit of volatility. If you would invest  2,392  in Nordstrom on December 30, 2024 and sell it today you would earn a total of  54.00  from holding Nordstrom or generate 2.26% return on investment over 90 days.

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

Dillards Capital Trust  vs.  Nordstrom

Dillards Capital Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards Capital Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Dillards Capital is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Nordstrom

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nordstrom are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Nordstrom is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dillards Capital and Nordstrom

The main advantage of trading using opposite Dillards Capital and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dillards Capital 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 Dillards Capital Trust 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.