Correlation Between Nordstrom and Woolworths Holdings

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

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

Diversification Opportunities for Nordstrom and Woolworths Holdings

-0.52

Correlation Coefficient

Nordstrom  Woolworths Holdings

Excellent diversification

The 3 months correlation between Nordstrom and Woolworths is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nordstrom and Woolworths Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Holdings 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 Woolworths Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Holdings has no effect on the direction of Nordstrom i.e., Nordstrom and Woolworths Holdings go up and down completely randomly.

Pair Corralation between Nordstrom and Woolworths Holdings

Considering the 90-day investment horizon Nordstrom is expected to generate 0.37 times more return on investment than Woolworths Holdings. However, Nordstrom is 2.71 times less risky than Woolworths Holdings. It trades about 0.13 of its potential returns per unit of risk. Woolworths Holdings Ltd is currently generating about -0.01 per unit of risk. If you would invest  2,252  in Nordstrom on November 28, 2024 and sell it today you would earn a total of  184.00  from holding Nordstrom or generate 8.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Nordstrom  vs.  Woolworths Holdings Ltd

Nordstrom

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordstrom are ranked lower than 9 (%) 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 March 2025.

Woolworths Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Woolworths Holdings Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Woolworths Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nordstrom and Woolworths Holdings

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

The idea behind Nordstrom and Woolworths Holdings Ltd 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.