Correlation Between Macys and Austral Gold

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

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

Diversification Opportunities for Macys and Austral Gold

-0.17

Correlation Coefficient

Macys  Austral Gold

Good diversification

The 3 months correlation between Macys and Austral is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Austral Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austral Gold Limited and Macys 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 Macys Inc are associated (or correlated) with Austral Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austral Gold Limited has no effect on the direction of Macys i.e., Macys and Austral Gold go up and down completely randomly.

Pair Corralation between Macys and Austral Gold

Taking into account the 90-day investment horizon Macys is expected to generate 16.33 times less return on investment than Austral Gold. But when comparing it to its historical volatility, Macys Inc is 12.04 times less risky than Austral Gold. It trades about 0.07 of its potential returns per unit of risk. Austral Gold Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3.55  in Austral Gold Limited on September 28, 2024 and sell it today you would lose (1.59) from holding Austral Gold Limited or give up 44.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Macys Inc  vs.  Austral Gold Limited

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.

Austral Gold Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Austral Gold Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Austral Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macys and Austral Gold

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

The idea behind Macys Inc and Austral Gold Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.