Correlation Between Macys and Big 5

Can any of the company-specific risk be diversified away by investing in both Macys and Big 5 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 Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Macys Inc and Big 5 Sporting, you can compare the effects of market volatilities on Macys and Big 5 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 Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Macys and Big 5.

Diversification Opportunities for Macys and Big 5

-0.17

Correlation Coefficient

Macys  Big 5

Good diversification

The 3 months correlation between Macys and Big is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting 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 Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Macys i.e., Macys and Big 5 go up and down completely randomly.

Pair Corralation between Macys and Big 5

Taking into account the 90-day investment horizon Macys Inc is expected to generate 0.38 times more return on investment than Big 5. However, Macys Inc is 2.62 times less risky than Big 5. It trades about 0.09 of its potential returns per unit of risk. Big 5 Sporting is currently generating about -0.02 per unit of risk. If you would invest  1,505  in Macys Inc on September 26, 2024 and sell it today you would earn a total of  177.00  from holding Macys Inc or generate 11.76% return on investment over 90 days.

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

Macys Inc  vs.  Big 5 Sporting

Macys Inc

Risk-Adjusted Performance

6 of 100

Modest

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 unsteady primary indicators, Macys displayed solid returns over the last few months and may actually be approaching a breakup point.

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Macys and Big 5

The main advantage of trading using opposite Macys and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macys position performs unexpectedly, Big 5 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 Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Macys Inc and Big 5 Sporting 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.