Correlation Between Sea and Nordstrom

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

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

Diversification Opportunities for Sea and Nordstrom

0.4

Correlation Coefficient

Sea  Nordstrom

Very weak diversification

The 3 months correlation between Sea and Nordstrom is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Sea 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 Sea 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 Sea i.e., Sea and Nordstrom go up and down completely randomly.

Pair Corralation between Sea and Nordstrom

Allowing for the 90-day total investment horizon Sea is expected to generate 1.0 times more return on investment than Nordstrom. However, Sea is 1.0 times less risky than Nordstrom. It trades about 0.11 of its potential returns per unit of risk. Nordstrom is currently generating about 0.07 per unit of risk. If you would invest  9,483  in Sea on September 26, 2024 and sell it today you would earn a total of  1,456  from holding Sea or generate 15.35% return on investment over 90 days.

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

Sea  vs.  Nordstrom

Sea

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nordstrom

Risk-Adjusted Performance

5 of 100

Modest

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 Sea and Nordstrom

The main advantage of trading using opposite Sea and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.