Correlation Between Educational Development and Nordstrom

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

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

Diversification Opportunities for Educational Development and Nordstrom

-0.53

Correlation Coefficient

Educational Development  Nordstrom

Excellent diversification

The 3 months correlation between Educational and Nordstrom is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Educational Development and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Educational Development 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 Educational Development 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 Educational Development i.e., Educational Development and Nordstrom go up and down completely randomly.

Pair Corralation between Educational Development and Nordstrom

Given the investment horizon of 90 days Educational Development is expected to under-perform the Nordstrom. But the stock apears to be less risky and, when comparing its historical volatility, Educational Development is 1.0 times less risky than Nordstrom. The stock trades about -0.29 of its potential returns per unit of risk. The Nordstrom is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,469  in Nordstrom on September 26, 2024 and sell it today you would lose (48.00) from holding Nordstrom or give up 1.94% of portfolio value over 90 days.

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

Educational Development  vs.  Nordstrom

Educational Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Educational Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Educational Development and Nordstrom

The main advantage of trading using opposite Educational Development and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Educational Development 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 Educational Development 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.