Correlation Between Macys and Gulf Island

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

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

Diversification Opportunities for Macys and Gulf Island

0.52

Correlation Coefficient

Macys  Gulf Island

Very weak diversification

The 3 months correlation between Macys and Gulf is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and Gulf Island Fabrication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Island Fabrication 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 Gulf Island. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Island Fabrication has no effect on the direction of Macys i.e., Macys and Gulf Island go up and down completely randomly.

Pair Corralation between Macys and Gulf Island

Taking into account the 90-day investment horizon Macys is expected to generate 5.53 times less return on investment than Gulf Island. But when comparing it to its historical volatility, Macys Inc is 1.01 times less risky than Gulf Island. It trades about 0.01 of its potential returns per unit of risk. Gulf Island Fabrication is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  498.00  in Gulf Island Fabrication on September 28, 2024 and sell it today you would earn a total of  211.00  from holding Gulf Island Fabrication or generate 42.37% return on investment over 90 days.

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

Macys Inc  vs.  Gulf Island Fabrication

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.

Gulf Island Fabrication

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gulf Island Fabrication are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Gulf Island demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Macys and Gulf Island

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

The idea behind Macys Inc and Gulf Island Fabrication 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.