Correlation Between Alibaba Group and Nordstrom
Can any of the company-specific risk be diversified away by investing in both Alibaba Group 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 Alibaba Group and Nordstrom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alibaba Group Holding and Nordstrom, you can compare the effects of market volatilities on Alibaba Group 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 Alibaba Group with a short position of Nordstrom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alibaba Group and Nordstrom.
Diversification Opportunities for Alibaba Group and Nordstrom
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alibaba and Nordstrom is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alibaba Group Holding and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Alibaba Group 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 Alibaba Group Holding 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 Alibaba Group i.e., Alibaba Group and Nordstrom go up and down completely randomly.
Pair Corralation between Alibaba Group and Nordstrom
Given the investment horizon of 90 days Alibaba Group Holding is expected to generate 0.89 times more return on investment than Nordstrom. However, Alibaba Group Holding is 1.13 times less risky than Nordstrom. It trades about 0.01 of its potential returns per unit of risk. Nordstrom is currently generating about -0.02 per unit of risk. If you would invest 8,558 in Alibaba Group Holding on September 26, 2024 and sell it today you would lose (6.00) from holding Alibaba Group Holding or give up 0.07% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Alibaba Group Holding vs. Nordstrom
Performance |
Timeline |
Alibaba Group Holding |
Nordstrom |
Alibaba Group and Nordstrom Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alibaba Group and Nordstrom
The main advantage of trading using opposite Alibaba Group and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alibaba Group 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.Alibaba Group vs. PDD Holdings | Alibaba Group vs. MercadoLibre | Alibaba Group vs. JD Inc Adr | Alibaba Group vs. Sea |
Check out your portfolio center.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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