Correlation Between Destination and Nordstrom

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

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

Diversification Opportunities for Destination and Nordstrom

-0.29

Correlation Coefficient

Destination  Nordstrom

Very good diversification

The 3 months correlation between Destination and Nordstrom is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Destination XL Group and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Destination 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 Destination XL Group 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 Destination i.e., Destination and Nordstrom go up and down completely randomly.

Pair Corralation between Destination and Nordstrom

Given the investment horizon of 90 days Destination XL Group is expected to generate 2.03 times more return on investment than Nordstrom. However, Destination is 2.03 times more volatile than Nordstrom. It trades about 0.2 of its potential returns per unit of risk. Nordstrom is currently generating about -0.02 per unit of risk. If you would invest  228.00  in Destination XL Group on September 26, 2024 and sell it today you would earn a total of  51.00  from holding Destination XL Group or generate 22.37% return on investment over 90 days.

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

Destination XL Group  vs.  Nordstrom

Destination XL Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Destination XL Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Destination is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Nordstrom

Risk-Adjusted Performance

5 of 100

Insignificant

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 unsteady basic indicators, Nordstrom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Destination and Nordstrom

The main advantage of trading using opposite Destination and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destination 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 Destination XL Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.