Correlation Between Bank of America and Macys

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

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

Diversification Opportunities for Bank of America and Macys

0.44

Correlation Coefficient

Bank of America  Macys

Very weak diversification

The 3 months correlation between Bank and Macys is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Bank of America 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 Bank of America are associated (or correlated) with Macys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macys Inc has no effect on the direction of Bank of America i.e., Bank of America and Macys go up and down completely randomly.

Pair Corralation between Bank of America and Macys

Considering the 90-day investment horizon Bank of America is expected to generate 0.7 times more return on investment than Macys. However, Bank of America is 1.42 times less risky than Macys. It trades about 0.13 of its potential returns per unit of risk. Macys Inc is currently generating about 0.07 per unit of risk. If you would invest  3,946  in Bank of America on September 28, 2024 and sell it today you would earn a total of  509.00  from holding Bank of America or generate 12.9% return on investment over 90 days.

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

Bank of America  vs.  Macys Inc

Bank of America

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Macys Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Macys may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bank of America and Macys

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

The idea behind Bank of America and Macys Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.