Correlation Between Raytech Holding and Nordstrom

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

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

Diversification Opportunities for Raytech Holding and Nordstrom

0.28

Correlation Coefficient

Raytech Holding  Nordstrom

Modest diversification

The 3 months correlation between Raytech and Nordstrom is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Raytech Holding Limited and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Raytech Holding 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 Raytech Holding Limited 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 Raytech Holding i.e., Raytech Holding and Nordstrom go up and down completely randomly.

Pair Corralation between Raytech Holding and Nordstrom

Considering the 90-day investment horizon Raytech Holding Limited is expected to generate 80.82 times more return on investment than Nordstrom. However, Raytech Holding is 80.82 times more volatile than Nordstrom. It trades about 0.09 of its potential returns per unit of risk. Nordstrom is currently generating about 0.2 per unit of risk. If you would invest  138.00  in Raytech Holding Limited on December 29, 2024 and sell it today you would earn a total of  66.00  from holding Raytech Holding Limited or generate 47.83% return on investment over 90 days.

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

Raytech Holding Limited  vs.  Nordstrom

Raytech Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Raytech Holding Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Raytech Holding showed solid returns over the last few months and may actually be approaching a breakup point.

Nordstrom

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nordstrom are ranked lower than 16 (%) 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 Raytech Holding and Nordstrom

The main advantage of trading using opposite Raytech Holding and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytech Holding 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 Raytech Holding Limited 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.