Correlation Between Nordstrom and PDD Holdings

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

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

Diversification Opportunities for Nordstrom and PDD Holdings

-0.56

Correlation Coefficient

Nordstrom  PDD Holdings

Excellent diversification

The 3 months correlation between Nordstrom and PDD is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Nordstrom and PDD Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PDD 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 PDD Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PDD Holdings has no effect on the direction of Nordstrom i.e., Nordstrom and PDD Holdings go up and down completely randomly.

Pair Corralation between Nordstrom and PDD Holdings

Considering the 90-day investment horizon Nordstrom is expected to generate 0.62 times more return on investment than PDD Holdings. However, Nordstrom is 1.6 times less risky than PDD Holdings. It trades about 0.07 of its potential returns per unit of risk. PDD Holdings is currently generating about -0.04 per unit of risk. If you would invest  2,245  in Nordstrom on September 25, 2024 and sell it today you would earn a total of  208.00  from holding Nordstrom or generate 9.27% return on investment over 90 days.

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

Nordstrom  vs.  PDD Holdings

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.

PDD Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PDD Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Nordstrom and PDD Holdings

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

The idea behind Nordstrom and PDD Holdings 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 CEOs Directory module to screen CEOs from public companies around the world.