Correlation Between Floor Decor and Macys

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

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

Diversification Opportunities for Floor Decor and Macys

-0.05

Correlation Coefficient

Floor Decor  Macys

Good diversification

The 3 months correlation between Floor and Macys is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Floor Decor Holdings and Macys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macys Inc and Floor Decor 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 Floor Decor Holdings 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 Floor Decor i.e., Floor Decor and Macys go up and down completely randomly.

Pair Corralation between Floor Decor and Macys

Considering the 90-day investment horizon Floor Decor Holdings is expected to generate 0.81 times more return on investment than Macys. However, Floor Decor Holdings is 1.23 times less risky than Macys. It trades about 0.05 of its potential returns per unit of risk. Macys Inc is currently generating about 0.01 per unit of risk. If you would invest  6,979  in Floor Decor Holdings on September 17, 2024 and sell it today you would earn a total of  4,068  from holding Floor Decor Holdings or generate 58.29% return on investment over 90 days.

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

Floor Decor Holdings  vs.  Macys Inc

Floor Decor Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Floor Decor Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Floor Decor is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Macys Inc

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 6 (%) 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 Floor Decor and Macys

The main advantage of trading using opposite Floor Decor and Macys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floor Decor 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 Floor Decor Holdings 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.