Correlation Between Natura Co and Nordstrom

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

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

Diversification Opportunities for Natura Co and Nordstrom

-0.41

Correlation Coefficient

Natura Co  Nordstrom

Very good diversification

The 3 months correlation between Natura and Nordstrom is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding and Nordstrom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordstrom and Natura Co 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 Natura Co 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 Natura Co i.e., Natura Co and Nordstrom go up and down completely randomly.

Pair Corralation between Natura Co and Nordstrom

Assuming the 90 days trading horizon Natura Co Holding is expected to under-perform the Nordstrom. In addition to that, Natura Co is 3.52 times more volatile than Nordstrom. It trades about -0.08 of its total potential returns per unit of risk. Nordstrom is currently generating about 0.13 per unit of volatility. If you would invest  13,507  in Nordstrom on September 24, 2024 and sell it today you would earn a total of  354.00  from holding Nordstrom or generate 2.62% return on investment over 90 days.

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

Natura Co Holding  vs.  Nordstrom

Natura Co Holding

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Natura Co Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Natura Co is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Nordstrom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordstrom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Nordstrom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Natura Co and Nordstrom

The main advantage of trading using opposite Natura Co and Nordstrom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natura Co 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 Natura Co Holding 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.