Correlation Between Macys and KKR Co

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

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

Diversification Opportunities for Macys and KKR Co

0.53

Correlation Coefficient

Macys  KKR Co

Very weak diversification

The 3 months correlation between Macys and KKR is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Macys Inc and KKR Co LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Co LP 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 KKR Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Co LP has no effect on the direction of Macys i.e., Macys and KKR Co go up and down completely randomly.

Pair Corralation between Macys and KKR Co

Taking into account the 90-day investment horizon Macys is expected to generate 1.2 times less return on investment than KKR Co. In addition to that, Macys is 1.13 times more volatile than KKR Co LP. It trades about 0.07 of its total potential returns per unit of risk. KKR Co LP is currently generating about 0.09 per unit of volatility. If you would invest  13,222  in KKR Co LP on September 24, 2024 and sell it today you would earn a total of  1,536  from holding KKR Co LP or generate 11.62% 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.  KKR Co LP

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.

KKR Co LP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Macys and KKR Co

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

The idea behind Macys Inc and KKR Co LP 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.