Correlation Between Vipshop Holdings and Nordstrom

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

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

Diversification Opportunities for Vipshop Holdings and Nordstrom

-0.58

Correlation Coefficient

Vipshop Holdings  Nordstrom

Excellent diversification

The 3 months correlation between Vipshop and Nordstrom is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Vipshop Holdings 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 Vipshop Holdings 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 Vipshop Holdings i.e., Vipshop Holdings and Nordstrom go up and down completely randomly.

Pair Corralation between Vipshop Holdings and Nordstrom

Given the investment horizon of 90 days Vipshop Holdings Limited is expected to generate 1.24 times more return on investment than Nordstrom. However, Vipshop Holdings is 1.24 times more volatile than Nordstrom. It trades about 0.02 of its potential returns per unit of risk. Nordstrom is currently generating about -0.02 per unit of risk. If you would invest  1,354  in Vipshop Holdings Limited on September 26, 2024 and sell it today you would earn a total of  9.00  from holding Vipshop Holdings Limited or generate 0.66% return on investment over 90 days.

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

Vipshop Holdings Limited  vs.  Nordstrom

Vipshop Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vipshop Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 Vipshop Holdings and Nordstrom

The main advantage of trading using opposite Vipshop Holdings and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vipshop Holdings 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 Vipshop Holdings 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.