Correlation Between Macys and Floor Decor

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

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

Diversification Opportunities for Macys and Floor Decor

-0.05

Correlation Coefficient

Macys  Floor Decor

Good diversification

The 3 months correlation between Macys and Floor is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Floor Decor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floor Decor Holdings 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 Floor Decor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floor Decor Holdings has no effect on the direction of Macys i.e., Macys and Floor Decor go up and down completely randomly.

Pair Corralation between Macys and Floor Decor

Taking into account the 90-day investment horizon Macys is expected to generate 6.52 times less return on investment than Floor Decor. In addition to that, Macys is 1.23 times more volatile than Floor Decor Holdings. It trades about 0.01 of its total potential returns per unit of risk. Floor Decor Holdings is currently generating about 0.05 per unit of volatility. 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

Macys Inc  vs.  Floor Decor Holdings

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.

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.

Pair Trading with Macys and Floor Decor

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

The idea behind Macys Inc and Floor Decor Holdings 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.