Correlation Between Macys and Chicken Soup

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

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

Diversification Opportunities for Macys and Chicken Soup

-0.35

Correlation Coefficient

Macys  Chicken Soup

Very good diversification

The 3 months correlation between Macys and Chicken is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Chicken Soup For in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicken Soup For 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 Chicken Soup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicken Soup For has no effect on the direction of Macys i.e., Macys and Chicken Soup go up and down completely randomly.

Pair Corralation between Macys and Chicken Soup

Taking into account the 90-day investment horizon Macys Inc is expected to generate 0.41 times more return on investment than Chicken Soup. However, Macys Inc is 2.47 times less risky than Chicken Soup. It trades about 0.01 of its potential returns per unit of risk. Chicken Soup For is currently generating about -0.09 per unit of risk. If you would invest  1,882  in Macys Inc on September 29, 2024 and sell it today you would lose (128.00) from holding Macys Inc or give up 6.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.4%
Values	Daily Returns

Macys Inc  vs.  Chicken Soup For

Macys Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macys Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Macys displayed solid returns over the last few months and may actually be approaching a breakup point.

Chicken Soup For

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chicken Soup For has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Chicken Soup is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Macys and Chicken Soup

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

The idea behind Macys Inc and Chicken Soup For 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.