Correlation Between Nordstrom and Kohls Corp

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

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

Diversification Opportunities for Nordstrom and Kohls Corp

-0.78

Correlation Coefficient

Nordstrom  Kohls Corp

Pay attention - limited upside

The 3 months correlation between Nordstrom and Kohls is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nordstrom and Kohls Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kohls Corp 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 Kohls Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kohls Corp has no effect on the direction of Nordstrom i.e., Nordstrom and Kohls Corp go up and down completely randomly.

Pair Corralation between Nordstrom and Kohls Corp

Considering the 90-day investment horizon Nordstrom is expected to generate 0.04 times more return on investment than Kohls Corp. However, Nordstrom is 24.01 times less risky than Kohls Corp. It trades about 0.2 of its potential returns per unit of risk. Kohls Corp is currently generating about -0.15 per unit of risk. If you would invest  2,392  in Nordstrom on December 29, 2024 and sell it today you would earn a total of  53.00  from holding Nordstrom or generate 2.22% return on investment over 90 days.

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

Nordstrom  vs.  Kohls Corp

Nordstrom

Risk-Adjusted Performance

Good

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.

Kohls Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kohls Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Nordstrom and Kohls Corp

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

The idea behind Nordstrom and Kohls Corp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.